EMV: U.S. Market Update EMV for Merchants

© Copyright 2014 Vantiv, LLC. All rights reserved. Vantiv, the Vantiv logo, and all other Vantiv product or service names and logos are

registered trademarks or trademarks of Vantiv, LLC in the USA and other countries. ® indicates USA registration.

z z

2

Disclaimer: This communication, including any content herein and/or attachments hereto, is

provided as a convenience only, does not constitute legal advice and does not create and attorney client

relationship. Because of the generality of this communication, the information provided herein may not be

applicable in all situations and does not constitute a comprehensive list of issues that could impact your

business. As such and to understand how the information in this communication may impact your business,

you are encouraged to seek the advice from your legal counsel, compliance and/or other subject matter

expert based on the facts and circumstances of your organization’s particular situation.

3

Agenda

• U.S. Market Stats

• EMF Update

• EMV and Debit

• Debit Routing

• Vantiv and EMV

• Next Steps

U.S. EMV Market Statistics

z z

5

• 511 million credit cards

› 31% of the global total

• 572 million debit cards

› 32% of the global total

• 16 million payment terminals

› 11 million integrated

› 5 million stand alone

• Wedge readers unaccounted for

› Utilized by hospitality, service industries

US Market Today*

* Data is only based on information provided by Vantiv’s partners and does not include all international payment systems.

6

US Market Today*

• 16 Independent “PIN” Debit Networks

› 37% of total US debit volume

› Routed 19 Billion of US PIN transactions in 2012

› Federal regulations ensure merchant “least cost routing” option

for PIN debit transactions

• 9 Acquirers Represent 70% of Processing Volume

• 1000+ Independent Sales Organizations (ISOs)

› Primary business interface of small merchants

• 500+ Independent Software Vendors (ISVs)

› Primary processing interface to mid-tier merchants

* Data is only based on information provided by Vantiv’s partners and does not include all international payment systems.

7

US Market EMV Update

• Significant progress underway*

› Multiple issuing pilots underway, top issuers

› Up to 2 million EMV capable terminals installed

› 5-20 million EMV cards issued

› Top acquirers fully certified

› Stand Alone Terminal applications being developed/

certified

› Debit routing challenges resolved

› ISVs adding EMV support to products

* Data is only based on information provided by Vantiv’s partners and does not include all international payment systems.

8

• Merchants reinvigorating EMV cert and Security discussions

as result of 2013 holiday breaches

• Top 25 Vantiv merchants plan to certify by Q1, 2015

• Wal-Mart “live” with EMV today

• Inability to finalize PIN Bypass specifications may result in

slower TTM

• Significant drive toward PIN adoption promoted by merchants

(credit and debit)

• Contactless adoption minimal outside of QSR, Drug Store,

Petro verticals

US Market EMV Update Merchants

9

Issuers

• Large issuers piloting in 2014

• Anticipate aggressive number of 2014 pilots:

› Smart Card Alliance EMV Forum (EMF) pilot planned Q4

› Includes FIs and Merchants (WF, BoA, SunTrust, Target,

others TBD)

• Vantiv pilot begins August, 2014 with issuers and

merchants

• Utilizing Common US AID for debit ONLY

US Market EMV Update

Brands/Networks

• Visa and MC reaffirmed EMV October, 2015 liability shift

commitment

• PIN-on-Credit vs. Signature Preferring

› Signature Credit will likely prevail initially

• Debit

› US Common AID meets current Reg II requirement

› Largest debit networks (Star, Pulse) announced support

› Potentially future-proofs for signature duality

10

US Market EMV Update

Brand Roadmaps

April 2013 Processors must

support EMV

April 2015 3rd party ATM

must support EMV

October 2015 Liability shift of

counterfeit transactions

October 2017 Liability shift for AFD

Liability shift for ATM

April 2013 Processors must

support EMV

International ATM

liability shift

October 2015 Liability shift of

counterfeit transactions

October 2016 Liability shift for ATM

October 2017 Liability shift for AFD

April 2013 Processors must

support EMV

October 2015 Liability shift of

counterfeit transactions

October 2017 Liability shift for AFD

April 2013 Processors must

support EMV

October 2015 Liability shift of

counterfeit transactions

October 2017 Fuel liability shift

283 business days to Counterfeit Fraud Liability Shift

11

z z

EMF Update

EMV Migration Forum Update

13

• The EMV Migration Forum is an independent, cross-industry

body created by the SCA to address issues that require

cooperation and coordination across the payments space in

order to successfully introduce EMV technology in the U.S.

• Released the U.S. EMV Debit Framework in April, 2014.

• Creating and delivering a series of EMV educational

webinars.

• Developing recommendations for securing the CNP channel.

• Developing a framework for streamlining the EMV certification

process.

http://www.emv-connection.com/

EMV and Debit

z z

› EMV and Debit

15

• As designed, card (i.e. the issuer) determines debit routing, not merchant.

This conflicts with the Durbin amendment of the Dodd–Frank Wall Street

Reform Act.

• EMF develops debit framework to support PIN debit routing choice.

• U.S. District court ruling in July, 2013 opens the possibility that at least

two unaffiliated Signature networks will have to be supported as well as

two PIN networks.

• EMF regroups to account for potential of

signature duality.

• Appeals Court overturns U.S. District

decision. May go to U.S. Supreme Court.

• EMF proposes new debit framework

designed to be “future-proofed” against

ultimate outcome of court case.

z z

Debit Routing

17

EMF Debit Routing Framework

› Primary goal is to propose a set of baseline technical

specifications for a U.S. EMV debit solution intended to be

consistent with applicable technical and regulatory

requirements and provide a viable technological approach

› Intended as a model, or framework, serving as the basis for

one or more technological solutions to be developed

› The EMV Migration Forum does not mandate adoption of or

compliance with the framework

› Based entirely on EMV chip technology with no proprietary

data elements or logical process steps

› The U.S. common debit AID would be shared across U.S.

debit networks and would be for domestic use

18

EMF Debit Routing Framework Transaction Flow – US Common Debit AID with Signature

Card Merchant TerminalAcquirer/Store/Network

back-endCardholder

Message “Insert or

Tap Card”

Insert Card

Card powered up

Application list

returned to

terminal

Initialized and

ready to accept

transaction

Application

selection (via PSE

or explicit)

Candidate list

created

International + US

Debit AID (6-digit

BIN available)

Select US Debit

AID

Read application

data

Full PAN and CVM

preference list

Application

selection & GPO

Optional pre-

selection BIN

based on routing

choice

Use US Debit?

Standard EMV

with Intl AID

Card CVM

1. Online PIN

2. No CVM

3. Signature

Online PIN

Enter PIN

Enter PIN or

Bypass

PIN entry captured

Online PIN block

created

No PIN transaction

initiated

BIN Routing (PAN,

Online PIN)

No PIN Routing

(PAN, No CVM

limit, Sig support))

Routing input:

PAN, Type (PIN/

no PIN), Amount

NoYes

PIN entered

PIN bypassed

A

Vantiv Confidential

19

EMF Debit Routing Framework Transaction Flow – US Common Debit AID with Signature – Page 2

Acquirer/Store/Network

back-endMerchant TerminalCardCardholder

A

Remove Card

A B C D

No

CVM

Lim

it

PIN

Sign

atur

e

E

PIN

No

CVM

Lim

it

Sign

atur

e

PIN

No

CVM

Lim

it

PIN

No

EMV

Supp

ort

BIN Routing

Merchant Routing Decision

Completed as

EMV PIN

Completed as

EMV No Sig

required

Completed as

EMV Sig capture

Completed as

EMV without

ARPC

Print receipt with

No Signture

Print receipt with

Signature (or sign

on screen)

Remove card

Sign

Option 1: ARQC &

Online PIN Block

Option 2: ARQC

(Request No CVM

or Sig approval)

Option 3: Drop

EMV data – send

to network track 2

eq. & PIN (chip

entry mode)

Auth

oriz

atio

n R

espo

nse

Approve with PIN

Approve with No

CVM

Approve with

Signature

Approve as mag-

stripe

Vantiv Confidential

z z

Vantiv and EMV

Industry Participation

21

• Only U.S. headquartered acquirer serving on EMVCo

Board of Advisors. EMVCo manages the EMV ICC

Specifications.

• Steering Committee member of the EMV Migration Forum.

• Member of the Smart Card Alliance’s Leadership Council.

The Alliance works to stimulate the understanding and

adoption of smart card technology.

EMV Achievements

22

• First U.S. Acquirer to Complete Mandate Requirements to Process both

EMV Visa and Interlink Transactions

• First U.S. Acquirer to Complete MasterCard® Requirements to Process

EMV Transactions for Both ATM and Point-of-Sale Locations

• First U.S. Service Provider to Certify Amex for ATM Acquiring

• First U.S. Service Provider to Certify ATM Upgrades with MasterCard ® and

NCR

• Industry leading closed-loop EMV testing environment with VIABLE

• Confirmed by all four major networks for self-accreditation

• First terminals in market with the Common U.S. Debit AID

z z

Next Steps

24

EMV Terminal Products Available

Today

EMV Transaction Processing Available

Today

EMV Terminal Applications

Available

Q3-4 2014

EMV capable terminals can be boarded today and downloaded with EMV

functionality upon availability of EMV certified applications

EMV Merchant Products Readiness & Roadmap

25

• General release of the Tandem 610 version of VIABLE

• Pilot of ISO 8583 version of VIABLE

• Combined Issuer and Merchant pilot in multiple

markets

• General release of Ingenico EMV-enabled terminals

• Certification of VeriFone terminals

Upcoming Milestones

z z

Questions