With 70 percent of the world’s consumers now using EMV-enabled cards, the growth of these high-security cards has been constant. But with contactless payments becoming more popular, what is the chance of the EMV-enabled card growing in Asia?
Early adoption of EMV was good in Asia
In the early 2000s, EMV – which stands for EuroPay, MasterCard, and Visa, who were the innovators of the technology which added a microchip to credit and debit cards to increase security – took off rapidly in Asia. By 2003, the Asia-Pacific region was being hailed as a world leader in the migration to EMV. The liability shift, however, was a major turning point in EMV adoption throughout the world.
Liability shifts are a major turning point in adoption
Liability shifts are when the liability for card fraud shifted from being the responsibility of the banks – as in the old magnetic strip technology – to being the responsibility of the retailer or merchant. This shift was brought about by the migration to EMV technology, and the better security for card payments. With EMV, the merchant can only process a payment through an EMV-enabled terminal, as long as the customer inputs the secret 4-digit security PIN. To ensure merchants were convinced to move to EMV-enabled point-of-sale (POS) terminals, the “liability shift” made merchants liable for fraud processed through their terminals. With that shift, came a massive move to EMV-enabled terminals, as merchants became worried about the life of their businesses when faced with the responsibility for fraudulent transactions.
Malaysia headed the region in EMV adoption
In Asia, some countries made the move ahead of others. Malaysia, for example, completed the migration to EMV by the close of 2005 and saw an 85 percent reduction in card fraud in the country. And while the US liability shift happened in 2015, this was also an important date for the Asian progress of EMV adoption. On October 1, 2015, liability shift happened for all ATMs across the region. This shifted the liability of fraud to the third-party ATM hosts, such as Bancnet and UnionPay, as well as bank-dedicated machines being shifted to the individual bank host. The 2015 shift excluded India, China, Thailand, and Japan, who will be required to make the shift on October 1, 2017.
Adoption is slow in the rest of the region
With this shift in liability, many ATM hosts are moving their machines to the EMV enabled type, and away from magnetic strip only machines. However, adoption has been slow in the region, and Asia-Pacific countries, as well as the US, are still the last areas of the globe to adopt EMV completely and are preventing issuers from maximizing the use of their investment in EMV-enabled cards.
Adoption of EMV reached expected levels
In 2015, Asia saw a massive 73 percent increase in the use of EMV-enabled cards in EMV-enabled terminals. Around 34 percent of all card-present transactions in Asia are now using EMV-enabled terminals. This puts Asia in line with the rest of the world in EMV adoption. In comparison, EMV in Europe – who made the liability shift several years earlier – accounts for around 97 percent of all card-present transactions. Major improvements in Asia are coming from China and India, as they move away from a cash-based market to a cashless economy. In 2013, according to the Royal Bank of Scotland’s “Emerging Asia” report, the growth of cashless payments topped 22 percent. And as more merchants make the shift to EMV, that trend continues throughout Asia.
Contactless payments are Asia’s new trend
Contactless payments are becoming a major trend in Asian countries, and are fast replacing traditional payment methods. Throughout Asia, 70 percent of all new cards are EMV-enabled, with almost 90 percent being contactless-capable in China. The global expectation for growth of contactless cards by 2020 is from 1.7 billion to around 6.2 billion cards in circulation. And there are now more ways than ever to make contactless payments, including near-field communication (NFC) mobile phones and “wearables”, which allows the user to “wear” an NFC-enabled device as a broach, pin, or other accessories.
Wearables is the next step in payment tech
The wearable market is set to take off in 2017 and 2018, with an expected growth of over 245 million wearable devices being sold by the end of 2019. Consumer awareness has gone viral, with many Asians aiming for the latest wearable gadgets, such as the Apple Watch and Samsung Gear. And with the next wave of wearables expected to be invisible, by using clothing or even contact lenses, the possibilities are endless. Manufacturers are claiming they can embed NFC-enabled devices into almost anything.
Asia still has a long way to go
However, there is still work to be done in Asia in the EMV world.Over 66 percent of transactions – both merchant and ATM – are done using magnetic strip cards. India is still showing as a challenge, despite the government’s attempts to move to a cashless society and economy. It still has a mostly cash economy, and application of the new reforms could take a decade to complete.
2020 Olympics forces Japan to move to EMV faster
Japan, however, is moving faster than the rest of Asia with its adoption of EMV. Japanese banking corporations have devised their own standards, and AEON Bank became the first to use only EMV-enabled ATMs in 2014. And the rest are fast following suit, with an expected 100 percent adoption by 2010. And the reason for this is the hosting of the 2020 Olympics, in Tokyo, where the country is going to play host to visitors from around the globe. With this expected influx, the country’s ATM network is being linked into the global transaction network, in preparation. While it is not the catalyst that EMV Co hoped for in Asia, it is definitely one that is working in Japan.
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