Wednesday, April 20, 2005

EMV: the end of credit-card as we know it

Belgium shows the first signs that introduction of EMV for credit-cards (which includes use of another PIN) leads to a reduced use of the credit-card. The situation is similar to that in the Netherlands where purse-scheme Chipper demanded a different second pin-code.

The Belgium rollout of PIN-based EMV credit cards has now fuelled an unexpected increase in debit card use, as consumers prefer to use the PIN for their debit cards. Issuers in the UK had expressed concerns that UK consumers would reduce their credit card use when PINs were introduced, but so far a significant drop has not been documented.

Belgium’s e-purse cards are predicted to benefit from the country’s EMV migration as debit cards will carry an EMV chip that can support e-purse and check guarantee functions. Until EMV cards were issued, Proton was the only financial smart card in Belgium, but the gains it achieved in the post-euro currency environment have caused speculation that Proton will be used for more small-value purchases once it is bundled on chip-based debit cards. Ultimately, Proton is predicted to take market share from debit cards, given the recent increases in the average amount per transaction on its cards.