EMV: U.S. Market Update EMV for Merchants

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© 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.

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.

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Agenda • U.S. Market Stats

• EMF Update • EMV and Debit • Debit Routing • Vantiv and EMV • Next Steps

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U.S. EMV Market Statistics

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

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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.

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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.

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US Market EMV Update Merchants • 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

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US Market EMV Update 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

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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

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Brand Roadmaps

April 2013

April 2013

April 2013

April 2013

Processors must support EMV

Processors must support EMV International ATM liability shift

Processors must support EMV

Processors must support EMV

April 2015 3rd party ATM must support EMV

October 2015 Liability shift of counterfeit transactions

October 2015 Liability shift of counterfeit transactions

October 2016

October 2015

October 2015

Liability shift of counterfeit transactions

Liability shift of counterfeit transactions

October 2017

October 2017

Liability shift for AFD

Fuel liability shift

Liability shift for ATM

October 2017 Liability shift for AFD Liability shift for ATM

October 2017 Liability shift for AFD

283 business days to Counterfeit Fraud Liability Shift 11

EMF Update

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EMV Migration Forum Update •

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/

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EMV and Debit

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› EMV and Debit •

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• • •

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.

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Debit Routing

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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 17

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

Card

Acquirer/Store/Network back-end

Merchant Terminal Initialized and ready to accept transaction

Message “Insert or Tap Card”

Card powered up Insert Card Application list returned to terminal

Optional preselection BIN based on routing choice

Application selection (via PSE or explicit)

Candidate list created International + US Debit AID (6-digit BIN available)

Use US Debit?

Yes Select US Debit AID

Application selection & GPO

Read application data Full PAN and CVM preference list

Card CVM 1. Online PIN 2. No CVM 3. Signature

No Standard EMV with Intl AID

Online PIN Enter PIN

PIN entered

Enter PIN or Bypass

PIN entry captured Online PIN block created

BIN Routing (PAN, Online PIN)

No PIN transaction initiated

No PIN Routing (PAN, No CVM limit, Sig support))

PIN bypassed

Routing input: PAN, Type (PIN/ no PIN), Amount

A

Vantiv Confidential

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

Card

Merchant Terminal

Acquirer/Store/Network back-end A

Completed as EMV PIN

Remove card

Sign

Print receipt with Signature (or sign on screen)

C

D

E

No EMV Support

Signature

PIN No CVM Limit

Completed as EMV No Sig required

B

PIN

BIN Routing A

PIN No CVM Limit

Print receipt with No Signture

PIN No CVM Limit Signature

Remove Card

Completed as EMV Sig capture Merchant Routing Decision

Completed as EMV without ARPC

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)

Approve with No CVM Approve with Signature

Authorization Response

Approve with PIN

Approve as magstripe

Vantiv Confidential

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Vantiv and EMV

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Industry Participation •

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.

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EMV Achievements •

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

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Next Steps

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EMV Merchant Products Readiness & Roadmap

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

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Upcoming Milestones • 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

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Questions

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