Endpoint: Time To Get Behind the Common AID

A common solution has been found that will ease EMV migration and permit compliance with the Durbin Amendment, but all networks must support the solution to realize its full benefits, says Terry Dooley.

The key to an easier, more affordable, and less complex solution for EMV in the United States is within our reach.

Terry Dooley is senior vice president and chief information officer at the Shazam electronic funds transfer network, Johnston, Iowa. Reach him at tdooley@shazam.net.

Among the challenges facing the U.S. migration to chip cards (commonly referred to as the switch to the Europay-MasterCard-Visa standard), one in particular has loomed large: How will EMV transactions be processed in a manner that meets the unique regulatory and infrastructure needs of the United States? Specifically, the U.S. must resolve these issues before widespread adoption can be attained:

– Regulation II, or the Durbin Amendment;

– The competitive payments-networks environment;

– Merchant routing;

– Issuer flexibility.

Interestingly, liability-shift deadlines have been instituted even as these outstanding issues exist. This underscores the need for all U.S. networks to work together to more quickly address the complexities of bringing all parties together to ensure the implementation is done correctly the first time.

Remember, Regulation II (often referred to as the Durbin Amendment) requires that two unaffiliated networks be available for all debit transactions, not just PIN-debit transactions. The current implementation of EMV, including the certification requirements of certain EMVCo standards, does not allow the merchant to choose the route of a transaction. This is in direct conflict with the requirements of a Durbin-compliant EMV solution in the U.S. 

Fortunately, the Secure Remote Payment Council’s (SRPc) Chip-and-PIN work group has announced support for a common application identifier (AID) and application for use in the U.S. Most important, the SRPc has support from 10 of the largest debit networks in the country. This is important because the ultimate goal of the work group is to find a chip-and-PIN solution that provides the same level of flexibility as magnetic-stripe cards have offered for networks, issuers, merchants, and acquirers.

There are three major implications of the common solution for the U.S. payments industry:

1. The common solution allows the use of all three card-verification methods (CVMs): PIN, signature, and no-CVM by all debit networks.

2. The solution allows individual network CVM capabilities and provides the types of transactions supported to be managed through existing infrastructure, such as the BIN file. Today, the BIN file identifies which issuers participate in which networks, as well as the transactions each network supports.

3. All networks must support the common AID and application for card and consumer authentication and authorization.

The good news is that the common AID and application could significantly speed up and ease the transition to EMV. If all networks, both PIN and signature, participate and all CVMs are supported, it would be as flexible as magnetic-stripe cards are today—all with the added security of EMV chip cards.

To successfully sustain a common AID and application, central governance is a must. Only with buy-in and accountability from all the U.S. debit networks can we create a system of checks and balances. If all networks come together, we have a better chance of developing technology and implementing rules that spark (rather than limit) innovation, competition, and growth.

If all networks in the U.S. allow their brands to initiate a transaction using the common AID and application, merchants would get the maximum routing flexibility. Issuers, too, including debit card-issuing community banks and credit unions, would enjoy maximum network portability.

The common solution, if supported by all PIN and signature networks, significantly reduces the complexity and cost to adopt EMV for all industry stakeholders. It is equally important that routing choice and flexibility apply to ATM transactions in the same manner as proposed for point of sale, and those conversations are under way in various EMV work groups.

Unfortunately, there is a chance that not all networks will participate in the common AID and application. If even one network chooses not to participate, this will exponentially drive up the complexity, virtually eroding the savings the industry could gain from a common AID and application. In short, a merchant and issuer will have to support multiple chip applications, and ultimately, could see as many as four or five applications on a given debit card.

It would also require significant changes to EMVCo certifications, requiring many network rules to be changed. This would create a much more costly development strategy for everyone involved.

Some have argued that a common U.S. solution may complicate international transactions for debit cardholders traveling abroad. It’s important to note that the common solution supported by SRPc and many networks can co-exist on the chip embedded in EMV-enabled debit cards with the card’s existing international applications. This will ensure worldwide interoperability, something critically important to issuers with frequently traveling cardholders or customers based overseas.

Further, the common solution allows networks to issue their own applications while supporting the common solution. The result? Both merchants and acquirers still have the ability to choose—something that is important not only from a regulatory standpoint, but also from a sound business-strategy position.

The key to an easier, more affordable, and less complex solution is within our reach. The common AID and application for EMV is possible, it is supported, and it is the best possible path for our country’s migration to the next era of payments acceptance.

Problem Solvers

The following work groups are currently hosting discussions to find solutions to the challenges facing EMV implementation in the United States:

– Secure Remote Payment Council (SRPc)

– Merchant Advisory Group (MAG)

– Smart Card Alliance – EMV migration Forum (EMF)

– ATMIA – ATM ISO industry group