The migration of magnetic bands to micro-circuits under the Europay MasterCard Visa (EMV) standard in credit and debit cards was discussed in a regional event held yesterday in Buenos Aires, the EMVTour Cono Sur 2013. This transition, that is more strongly taking place in Brazil, Mexico, Colombia and Venezuela, takes a step forward in the evolution towards NFC in Latin America, technology that could use the rules stated by EMV for the chip structure placed in the mobile phone; for validating the user’s PIN; contactless payment properties; including other matters ruled by the standard.
Edgar Betts, Associated Director of Smart Card Alliance, organizing the congress, explained to Convergencialatina that it was necessary to create an infrastructure for chips in mobile phones that will allow mobile payments. “With EMV we are ensuring that the information included in the chip is dynamic and unique, thus it is safe. The standard was developed by Visa, MasterCard and Europay (later acquired by MasterCard); American Express and Japan Credit Bureau (JCB) joined later. The rules set by EMV make contactless and mobile payment process mean safe transactions.”
Visa underlined contactless payments made with already migrated credit card as a previous step towards NFC. The company has experience on this in Guatemala –with the proximity payment product, “PayWave”-, Colombia and Brazil. Marcelo de Oliveira, Director of Emerging Products of Visa, stated that “one of the initial incentives to speed up the adoption in stores is the transaction speed; for example, at fast food stores. These grounds could attract new partners, such as mobile operators and interface or applications providers in each particular case."
As credit cards are being migrated, the point of sale (POS) terminals should also be changed; as stated to Convergencialatina, Hector Cano Poblete, from Solutions Sale Area of Gemalto: “Brazil is the most developed country regarding the financial system: over a total of 2.5 million POS terminals, between 300,000 and 400,000 can already be used for EMV and NFC.”
TIM and Banco Itaú pilot test. Gemalto executive spoke with Convergencialatina on one of the pilot tests being carried out with NFC in Brazil, together with TIM and bank Itaú. “Gemalto provides the chips and the application to make payments connected to our Trusted Service Manager (TSM) personalization center, that manages the credit card –in this case, MasterCard carries out the trial– for the different services. 100 friendly users and 100 stores from Sao Paulo and Rio de Janeiro take part in the pilot test," he stated.
As stated by Cano Poblete, TIM and Bank Itaú’s experience is aimed at testing NFC technology conceptually; however, transactions will not be charged on the user. The business will rely on Location Based Services (LBS), promotions, loyalty programs and advertising.
Regulation. Cano Poblete called the attention on other standard group to be considered for the evolution of mobile payments: Global Platform. “Today, a bank that issues a credit card for a user has no way to communicate with that plastic, unless the customer gets close physically, or communicates through the phone or Internet. Notwithstanding, with mobile payments, the bank could be connected with the card all the time. Therefore, it is necessary to define how those communications will be made between the mobile operator and the bank; with the transport company implementing mobile payments; with the stores issuing coupons. Global Platform has specifically created to set standards in those communications: these communication platforms are being tested in Latin America.”
He underlined that it was necessary to move forward with regulation on mobile payments and their relationship with banks. Regarding those cases that have already moved forward with regulatory frameworks, such as Colombia, Peru, Bolivia and soon Brazil–, he stated: “it is necessary to regulate several aspects: first, define to what extent the operator could enter; then decide whether the customer could use his account balance to do shopping. Additionally, which taxes will rule these cases (on telecommunications, on goods); and which transactions will be allowed. If decisions are not first made on these aspects, companies develop projects, invest, and when they want to put that in practice, they find there is a regulator that sets hindrances and prevent them from doing so.”