By Randy Smith,
Mobile Wallet Media
May 21, 2014
About Mobile Wallet Media
Mobile Wallet Media is a news media, analyst, marketing and consulting firm focused on the future of mobile: payments, marketing, loyalty commerce, security, prepaid, virtual currency, daily deals and the convergence of them all with social and local. The Chief Editor, Randy Smith, was the primary founder, inventor and former CEO of MobilePayUSA, a TechCrunch Disrupt Startup Alley Winner.
The Target breach was a recent catalyst in igniting the fraud solutions war pitting EMV vs. ‘Lock and Key.’ EMV you know, but Lock and Key? As covered in my prior article Ondot Systems and TSYS both recently announced they are offering a service enabling consumers to use a mobile phone app to lock and unlock or set parameters for card usage by proximity, one-time use and more.

The EMV PCI mandate that was outdated the second it was enacted. It is also a ‘Mafia-styled offer not to be refused’ due to the liability transfer to merchants that fail to adopt EMV. PCI mandates are not fun play dates unless you are a payment terminal manufacturer and essentially are the main reason why EMV is being pushed so hard. The terminal pushers have come up with some new reason to replace terminals every few years since they first rolled out. Up until EMV most all the features added were worthy of upgrade or at least had rationality to back them up.

EMV enthusiasts will say EMV is long overdue in the U.S., but it is estimated to cost banks and merchants near 10-billion for this EMV makeover. What will be gained from this overhaul that is not estimated to be ubiquitous for another 5-10 years? Slower transactions, higher card replacement costs for banks and still online fraud is not solved.

Even if EMV terminals were deployed at Target stores it would not have stopped the breach. The breach was made through a vendor access portal. Hackers from there gained access to payment terminals. PCI rules did not require card credentials to be encrypted inside terminals but only in transit. Several years back the Heartland breach revealed hackers were capturing card data in transmission to processors from POS. It appears a reactionary response to preventing card fraud has been PCI policy. EMV does not solve the card fraud problem. Until we reach EMV ubiquity we’ll still be stuck with magnetic stripes on cards.

A banking executive shared that Ondot Systems cut fraud losses by sixty percent. This is some serious savings for banks. Banks need only to integrate with TSYS or Ondot Systems and announce service to their customers. No new terminals for merchants or cards for consumers like with EMV. No billions of dollars and billions of hours spent or perhaps wasted. Calculating in fraud loss reduction and lower ongoing costs for banks to be able to continue to issue the conventional mag-stripe card, makes Lock and Key even more attractive.
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The Card Fraud Solutions War Has Begun: Could 'Lock and Key' Derail EMV?
In weighing the scale of Lock and Key vs. EMV the scales lean to Lock and Key. So the question of the day is should the PCI EMV mandate be repealed in favor of Lock and Key?

To be sure merchants, consumers and banks will favor this solution over EMV. It seems the only reason left to keep the EMV mandate in place is sales of payment terminals. NFC HCE for mobile payments may still be another reason for merchants to replace terminals. BLE and beacon and QR code solutions may however derail the need for NFC in terminals. Besides can’t an NFC peripheral just be plugged in rather than replace terminals?