Industry group formed to upgrade U.S. payment card platform

Already in use through much of Europe, the microchip EMV cards are less vulnerable to fraud because they do not contain the easily copied magnetic stripes

An industry group launched on Tuesday will guide a massive upgrade of the U.S. payment card system to a new platform designed to prevent card fraud.

The EMV (Europay, MasterCard, Visa) Migration Forum will coordinate efforts to enable the U.S. payment card system to accommodate EMV cards, widely deployed throughout Europe and in other parts of the world.

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The group is intended to be around for at least three years until payment acquirers, merchants, issuers, and processors have mostly transitioned to EMV around 2015, the forum said.

EMV payment cards contain a microchip with advanced cryptographic capabilities that are used to authenticate a transaction with banks' back-end systems. Transactions are authorized after a consumer enters a PIN.

The microchip has so far been less vulnerable to fraud, although security researchers at the University of Cambridge have pointed out faults with the system in academic settings and developed specialized attacks.

The microchip cards are intended to eventually move payment systems away from using the magnetic stripe on the back of cards, which is easily copied and used to create counterfeit cards.

Countries throughout Europe, which are mostly using EMV, have not been able to halt magnetic stripe transactions in part because EMV hasn't been rolled out in the United States. To do so would make it difficult for travelers to and from the United States to use their cards.

Credit card companies such as Visa and MasterCard spearheaded the move to EMV in Europe, spurring retailers to upgrade their point-of-sale terminals with the threat of new fraud liabilities if they processed magnetic-stripe only transactions.

The transition to EMV is daunting: payment terminals must be replaced, EMV payment cards must be issued to customers, and ATMs need hardware and software upgrades. Those changes, which are just a few examples of needed changes in the complicated systems, are expensive and occur slowly.

Australia, a country of 22 million with four major banks, began planning to migrate to EMV in 2007. As of this year, the majority of transactions are still performed with magnetic stripe due to a slow rollout of chip-enabled payment cards. The country expects by 2015 to mostly use EMV.

The EMV Migration Forum is scheduled to hold its first meeting Sept. 12 and 13 at MasterCard's headquarters in Purchase, New York.

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