Card payment technology has rapidly evolved from the old magnetic strip cards to incorporate chip and PIN technology, making them more secure for card present transactions. All over the world, card issuers are moving to cards with an EMV (EuroPay, MasterCard, and Visa) chip embedded into them, which takes card security to the next level, and South America is no different.
Brazilian market is the major target for stakeholders
Brazil is the largest market in South America for card payments and accounts for over 690 billion Brazilian Real (230 billion US dollars) every year. Around 80 percent of all online transactions are made using cards, and MasterCard and Visa account for 75 percent of all major payment methods in Brazil today.
EMV is already widespread in South America
EMV integration in South America is a process that has already begun. Visa announced that their milestone target for Brazil is the issuance of at least 100 million EMV-enabled cards by 2020. With more than 32 percent of the market in Brazil adopting the Visa EMV cards, they are well on their way to that target. Coincidentally, MasterCard is similarly making heavy inroads into EMV in Brazil, with 43 percent of all their cards being EMV-enabled.
And other countries in South America and the Caribbean are following suit, with massive migration in Colombia, Venezuela, and Mexico. And it is clear to see that those countries that have already started the EMV migration are seeing a decline in card present fraud across the board. They are also showing an improvement in card services, following the reduction of fraud.
Fraud drives EMV adoption in Latin America
The major drive in EMV adoption in South America has been high volumes of credit card fraud. With the region’s Liability Shift already in place, thanks to MasterCard Worldwide and Visa Inc., the local private networks have also started the migration to EMV technology. In South America, the microchip technology has been viewed as an opportunity to offer more services, rather than an added cost on an already expensive infrastructure.
The major challenges still being faced in migration in South America are “budget restraints and lack of knowledgeable resources”. However, there is an obvious increase in available resources, as new, impartial companies are opening up in the local market to add their technological expertise. And there is a move of the major financial institutions to mitigate the high fraud rates in the region due to the new mandates for the South American Liability Shift.
As the market need is different in South America, the industry stakeholders are implementing EMV cards with unique characteristics and are developing new variants on EMV solutions. These innovations in the implementation of EMV are making the migration more cost-effective and address many of the best opportunities EMV-enabled cards can provide.
Delayed penetration aided the move to the newest technology
In the Latin American region, there was a delay in the penetration of EMV cards which had only reached 30 percent by 2005. The situation changed in 2006 with an investment of over 200 million dollars in card technology. And the delay caused by the banks and card issuers has actually been to their benefit in the long run. Many merchants were able to avoid paying for the cost of the intermediate payment solutions and leapfrogged straight to the latest technology. In Mexico, EMV technology was adopted in 2002, using a very aggressive roll-out model. The same model was then used in Brazil and Argentina, with near totality migration by 2008.
South American fraud was traditionally low
Traditionally, fraud in South America had been one of the lowest in the world, but the rise in card fraud in the late 1990s – which was mainly caused by a widespread adoption of the magnetic strip cards – gave rise to a massive migration to EMV. The highest and fastest rate of adoption was seen in Brazil, which now has over 90 percent of all terminals upgraded to EMV-compliant. Those same terminals are also able to process contactless payments, which means the merchants will not have to suffer another costly upgrade for next-gen payment solutions.
Smaller markets like Chile and Peru have seen a slower migration to the EMV tech, and existing cardholders are still using the magnetic strip cards until they are replaced at the card expiry. But with a much lower number of cards in use in the smaller markets, fraud is less likely in the meantime.
Low-income consumers move to mobile wallets
The one area of penetration that is causing concern is the low-income market of the region. While the high-income market is saturated, the low-income market is suffering from a lack of adequate credit-rating systems, preventing lower income bracket customers from obtaining new cards. This is prompting a move to mobile technology, just as it has in India and many African countries, and many lower-income consumers may well skip the use of cards altogether, moving straight to the next-gen tech of mobile wallets.
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