Mobile Movement, NFC and EMVNFC Will Open Mobile Payments in 2011
Pressure from outside the United States will likely force the U.S. payments industry to make a shift from its magnetic-stripe infrastructure. But the shift might not necessarily include an immediate leap to EMV, the EuroPay, MasterCard, Visa standard, says Jania, senior vice president and general manager of Secure Transactions for Gemalto North America.
"All of the security features with NFC are of benefit to financial institutions. What you'll actually see is increased security, with the role of the Trusted Service Manager, because provisioning can be done securely and encrypted to your sole device," he says. And that enhanced security will help the U.S. move toward a more globally compliant payments infrastructure.
"The regulatory environment is looking at EMV, but I don't see any action anytime soon," Jania says. "What I do see is external pressure from outside the U.S. to adopt EMV. The U.S. will be forced to move to EMV, in order to be compliant with the rest of the world."
Add mobile to the equation, and NFC payments look even more attractive, he says. "Mobile devices now being equipped with NFC technology, and that is coming to fruition in 2011."
During this interview, Jania discusses:
- The future of global payments;
- The connection between mobile, EMV and NFC-enabled payments;
- The top three payments initiatives of 2011.
Jania is the senior vice president and general manager of Secure Transactions for Gemalto North America, where he drives all activity in the banking sector for contactless and smart card-based authentication solutions. Previously, Jania worked in the mobile communication division and was involved in the launch of 3G and NFC smart-card technology in North America. Jania has extensive component engineering and system-level architecture design experience, and helped to design and implement high-speed systems for the American Stock Exchange, the Chicago Board of Trade, the Chicago Options Exchange and other stock exchanges.
Mobile and EMVTRACY KITTEN: The mobile movement and EMV: What top payments trends are likely to have the greatest impact on the financial industry in 2011? Jack Jania, who oversees mobile and EMV initiatives for Gemalto North America, shares his thoughts about future regulatory mandates, mobile payments and the EMV chip standard.
Jack, we've spoken before about a possible migration to the EMV chip standard here in the U.S.; but a lack of supervision is one reason experts say U.S. card issuers have been reluctant to make a move forward. As the current regulatory environment ebbs and flows, do you foresee an EMV mandate coming down anytime soon; and, if so, what entity or body would likely oversee that mandated move?
JACK JANIA: Tracy, that's a good question. I would say that the regulatory environment is looking at EMV, but I don't see any action anytime soon. What I do see is external pressure from outside the U.S. to adopt EMV. An example is China, where the country has publicly stated that in 2015 it will stop issuing mag-stripe cards; and I know for a fact that Europe has also been discussing within their regulatory bodies doing something similar in a similar time-frame.
If those two initiatives happen outside the U.S., the U.S. will be forced to move to EMV, in order to be compliant with the rest of the world.
KITTEN: From a mobile payment's perspective, EMV might be a good fit, since it's based on chip technology that can easily be integrated into mobile devices. What role do you see mobile playing in the EMV move or a move to an EMV-like payments technology in the U.S.?
JANIA: I see mobile as a very good platform. It is based on chip-contactless technology that has EMV-like security mechanisms in it. So, I see mobile being a very good platform and a good fit.
KITTEN: Now, when we look at 2011 and consider mobile and EMV, what do you expect to be the emerging trend or trends? Could 2011, for instance, be the year that EMV actually gains some ground in the U.S.?
JANIA: Well, I would say absolutely, when we talk about specifically targeted deployments for international travelers. What we see is that U.S. mag-stripe cardholders are having an increasingly difficult time using their mag-stripe cards outside the United States, and some companies and financial institutions, such as United Nations Federal Credit Union, have already issued EMV cards in the United States to address this international-traveler problem. It's actually card acceptance that is the issue. Also, Travelex is a company that also is now offering EMV prepaid cards to international travelers in all of the major U.S. airports.
KITTEN: So, movement in mobile payments isn't a surprise, and it sounds like a movement toward EMV might not be a big surprise, either. But whether EMV gains ground or not, mobile payments will obviously take off in the U.S. What innovations do you see taking off in mobile payments in 2011?
JANIA: The biggest difference is two-fold. What we call the Trusted Service Manager service is now to the point where it's deployable in scale. The second initiative that I see taking place that is a positive trend is the beginning regarding mobile device availability with built-in NFC technology. What the Trusted Service Manager solution provides is over-the-air provisioning of payment-card account information on the phone, and that requires an NFC-enabled phone. So, those two things that are coming to fruition in 2011 are really going to be the drivers for mobile payment in 2011.
Contactless Payments and NFCKITTEN: Can we expect to see more NFC or near-field communications? It sounds like the answer is yes?
JANIA: Yes, it's the same thing. NFC is contactless payment with the cell phone. It is like a contactless payment you can perform today with a contactless payment card that is issued in the United States; that technology is just moving to cell phone. And what you also get the benefit of with the cell phone is the over-the-air provisioning, meaning that account information can be added to your phone without necessarily going into your bank.
Open Versus Closed Loop PaymentsKITTEN: And as we move forward, what's happening in the payment space? What are some of the things that stand out? You and I have spoken before about the payment spectrum, as it relates to closed-loop ticketing systems versus open-loop payments. Do you see this being a trend we should pay more attention to?
JANIA: I see that as a trend. We are starting to see, from a business perspective, many of the transit agencies putting out tenders to look at open-payment systems. This is a definite change in that ecosystem. The ecosystem, historically, has been a closed-loop, regional-payment type; now they're looking at using an open-loop payment mechanism that could use Visa-, MasterCard- or American Express-branded contactless cards that would allow them to get out of the ticketing business and just become a merchant, from a payment perspective.
Payments on Social Networks? More Hype Than RealityKITTEN: And what about the impact of social networking sites, such as Facebook? We hear a lot about Facebook impacting the payment's space. What do you expect to see in that area of payments in 2011?
JANIA: As far as social networking and peer-to-peer payments, it's still nascent. It's still relatively small, as we speak today. I see it growing, but I don't see it having a major impact for a number of years. And in looking forward, it will probably be integrated into the standard payment brands.
Mobile SecurityKITTEN: What about security challenges? We've talked quite a bit about mobile, so I'm going to wrap this question around mobile, but we could talk about other security challenges posed by other technologies as well. When we talk about near-field communications and mobile payments, what are some of the things that financial institutions should be looking to when it comes to security and fraud prevention?
JANIA: All of the security features with NFC are of benefit to financial institutions. What you'll actually see is increased security, with the role of the Trusted Service Manager, because provisioning can be done securely and encrypted to your sole device. EMV is much more secure than our existing mag-stripe infrastructure, which was never designed, initially, for security. EMV, from its onset, creation and inception, has always been designed for additional security, which requires a PIN with every transaction.
KITTEN: And so, how would EMV help to address some of those security challenges? Let's say we did have an EMV-like technology on a mobile device. Are you just saying the incorporation of a PIN in the transaction, not just having a chip transaction, would be the answer?
JANIA: Well, the PIN helps; but in EMV, and in these scenarios with a computer chip involved -- because there's a micro-processor chip in an EMV card and there is also a micro-processor chip involved in an NFC transaction in a mobile phone -- that chip has unique security keys. So, the EMV technology and the NFC technology are not susceptible to cloning like mag-stripe technology is today. That would be the major benefit of going to NFC and EMV -- it will eliminate the problem of skimming and card cloning.
KITTEN: Could you name the top three payments innovations you expect to see have an impact on mobile and chip-based payments, whether EMV or some other form, in 2011?
JANIA: I would say you know the top three. The traveler card programs, based on EMV chips being issued to U.S. customers, would be one. I see that being deployed by many institutions in 2011. I also see the transit open-loop ticket-payment system as being another trend. That is really going to make travel on metro systems and subway systems across the United States ubiquitous, to where anybody who has a credit card can easily access it. And, also, NFC will be a trend. And I expect with the availability of Trusted Service Manager technology, as well as additional handsets, you're going to see substantial gains in NFC payments in 2011.