Prime Factors Blog

How the Target Data Breach Affects Debit Card Issuers' Plans for EMV

Posted by Jeff Cherrington on Jun 27, 2014 12:00:00 PM

A study performed by Discover Financial Services’ Pulse network shows a marked increase in debit card issuers’ plans to provide EMV-compliant cards to cardmembers in the US. The breach affected every respondent to the survey to some degree. The Target, Niemen Marcus, and other data breaches increased the exposure of debit cards to 14% compared to 5% in the prior year. Tony Hayes, partner at Oliver Wyman, the group that conducted the study for Pulse states, “There has been a dramatic shift from issuers’ tepid interest last year to their active plans to implement EMV beginning in 2015.”

It seems that scope of the Target and other data breaches has enough financial impact to push debit issuers past their resistance to the business case of EMV-compliance. The study shows that fraud rates increased measurably in 2013, with signature debit losses up by 10% on a percentage of transaction basis. It further notes that issuers expect to start ramping up EMV-compliant card issuance in early in 2015, as part of their monthly reissue of cards to replace expiring cards. Since most issuers have a two or three year reissue period for debit cards, that means many will not have completely equipped all their cardholders with EMV-compliant cards until well after the liability shift date in October of 2015. This means that most will still bear the cost of point-of-sale counterfeit card fraud for years past the point when those costs could be shifted to merchants.

Much of the resistance to EMV-compliant card issue has been skepticism on the part of issuers regarding the cost of issuance compared to the potential benefit of reduced fraud losses. Now, with fraud losses going up, the business case becomes more compelling, particularly if the costs of issuing EMV-compliant cards can be reduced. Learn more of how Prime Factors’ Bank Card Security System and its EMV Data Preparation module reduce the cost of EMV-compliant card issuance, or contact us for a free demonstration.