I know the major news on the topic of digital payments is usually about NFC technology but the likelihood is that EVM is going to impact you before NFC does. This is because NFC is a credit card replacement technology being promoted by companies like PayPal, Amazon and Google whereas EVM is an upgrade to existing credit card technology focusing on the current big-names like Visa and MasterCard. Merchants are more likely to be forced to embrace EVM before they find it necessary to convert to NFC merely for customer convenience or technological chic. In fact, you as a cardholder may already have a credit card in your pocket that is EVM capable… just look for a small brass-looking metallic chip on the face of the card!

EVM stands for EuroPay, Visa and MasterCard – the consortium behind the evolution of credit card technology. American Express also joined the consortium in recent years, likely to avoid being left behind in the global payment technology revolution. By integrating a microchip onto the physical credit card, the card networks are making credit card fraud even more difficult by making the cards harder to imitate as well as securing the transmission of data from point of purchase to completion. For card-not-present transactions, there is a technology called EMV-CAP or EVM-DPA which substitutes the presence of the chip with a PIN or other validation method for online or phone orders. A secondary goal of EVM is to assure global interoperability using international standards – an important consideration for global travelers to ensure their credit card microchip will work anywhere in the world.

The EVM technology also includes communications standards for payment processing devices and gateways to secure against unauthorized interception of transaction data. This is designed to identify if a payment terminal has been compromised or if the gateway network has been compromised, allowing for the potential release of sensitive cardholder data. Even in the event of a compromise, the difficulty in mimicking encrypted data on the card’s microchip protects against unauthorized transactions. For this reason the more common identity confirmation method will become a PIN (personal identification number) rather than a cardholder signature. Chip-and-PIN technology is considered more secure even than chip-and-signature since there is no current method of digital signature comparison whereas the PIN that is entered can be instantly validated against the one encrypted on the card’s microchip.

EVM technology has already been widely implemented across Europe and parts of Asia. Visa, MasterCard and Discover all announced their intention to introduce this technology in the U.S. retail marketplace as early as April of 2013. If it is a mandate placed upon merchants who accept these types of cards, this will represent a significant re-investment for merchants to replace current magnetic stripe readers with EVM chip readers. As I stated earlier, this would imply that EVM is a more important mandate than the implementation of NFC readers because the catalyst behind NFC is primarily alternative financial institutions along with device manufacturers and merchants can choose whether or not to add new payment types to their existing platforms but cannot easily remove popular existing payment types. The drive to replace a credit card with an NFC-equipped cell phone may not be as important to merchants if the potential exists that almost every credit and debit card coming across their counters requires a new type of card reader. It’s simply the cost-benefit analysis of what they’d like to accept versus what they MUST accept for payment technologies.

One of the drawbacks for merchants is that by not adopting the EVM technology by the proposed April 2013 deadline, the cost of accepting credit card payments traditionally can go up in the form of higher interchange rates and the costs associated with fraud liability claims that will be shifted from the card issuer to the merchant. For the foreseeable future though, EVM cards will still contain magnetic stripes in order to be accepted at non-EVM merchants but either way the costs will fall on the merchant either in higher rates or in new technology investments.

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