Stages of development of the EMV standard

New technologies and standards

New technologies significantly change the construction of the banking and payment system. One of the most significant achievements was a card with a built-in microprocessor-a smart card (or chip card).

Microprocessor technology allows you to provide a reliable mechanism for paying for goods and services through various information communication channels in a virtual environment. The smart card can also be used as a unified identification tool for accessing the account through a virtual environment for performing standard banking operations with the account. Cards with a microprocessor not only facilitate such modern operations, but also provide an opportunity for further development of new products and services without the need to reissue the card.

By the end of the first half of 2004, Visa member banks in 50 countries had already issued over 106 million Visa chip cards. The Visa CEMEA region is gradually switching to a new, more secure chip technology. Programs for issuing and servicing chip cards are implemented in Russia, Kazakhstan, Ukraine, Uzbekistan, Azerbaijan, Georgia, Belarus, South Africa, Egypt, Kuwait, Lebanon, Oman, the United Arab Emirates, Ghana and many other countries in the CEMEA region. Visa member banks in the CEMEA region (Central and Eastern Europe, middle East and Africa) together, we issued more than 2.7 million Visa chip cards, which demonstrates the undisputed leadership of the Visa international payment system in promoting chip technologies that allow Visa member banks to provide their customers with the most reliable and advanced payment tools.

Most chip cards contain an implementation of one of the standard credit and debit products in accordance with the Visa Smart Debit/Credit specifications (abbreviated VSDC), which, in turn, are a specific implementation or version of the EMV standard for Visa member banks. On the basis of the VSDC application, both cards for individuals – Visa Electron, Visa Classic, Visa Gold, Visa Platinum, and corporate clients – Visa Business, Visa Business Electron, Visa Corporate and Visa Purchasing can be implemented.
Distribution and acceptance of magnetic stripe cards around the world became possible due to the implementation and compliance of the payment industry with a single global standard.

That is why Visa, joining forces with Europay and MasterCard, has developed the EMV (Europay, MasterCard, Visa) industry standard for payment chip cards with credit and debit applications. Using the EMV standard means that chip cards will be accepted in the retail and service network and ATMs all over the world and in the future will become as widespread as cards with a magnetic stripe.

Visa also initiated the creation of a unified industry standard for maintaining multiple applications on a single card with dynamic changes in the parameters and number of hosted applications. This standard was originally called “open Platform”. As more and more manufacturers and other payment systems (including American Express, JCB, and MasterCard International) get involved in working on this standard for multi-functional cards) this Visa initiative has grown into an international Association called the Global Platform. This is an open standard that can be used by any software developer, which will increase competition in creating applications, expand their diversity, and thus stimulate their development.

One of the proofs of the economic efficiency and social significance of the use of chip cards, as well as evidence of the use of the latest chip technologies by Russian banks, was the release of the Moskvich social card with a dual interface and dynamic data authentication (Dynamic Data Authentication – DDA). at the beginning of 2004, 20 thousand new-generation Visa cards were issued under the program “social card of Moskvich”. This program is one of the most successful projects involving Visa in the CEMEA region and demonstrates the success of the very idea of adapting global technology to the needs of the local market, thereby providing new advantages for both Muscovites and retail outlets that accept Visa cards.

Visa Smart Debit/Credit

Visa Smart Debit/Credit (VSDC) is the main Visa application for chip cards. Since this application complies with the EMV standard, cards with VSDC can be used in any country that has an EMV infrastructure.

One of the main advantages of using VSDC is the new advanced features offered by additional applications. These are various bonus schemes (loyalty), identification applications (ID), insurance, savings schemes, etc.
VSDC cards can be used to pay for goods and services, withdraw money from an ATM, make secure payments online, accumulate points and discounts in stores, and make payments via mobile phones, computers, and other technical devices.

Visa Horizon and VISA Cash

Recently, two new products have appeared in the CEMEA region – the Visa Horizon chip card and the Visa Cash e-wallet.

Visa Horizon is a debit card that stores funds on the chip itself, pre-authorizing them from a Bank account. Thus, when using it, there is no need to establish a real-time connection with the issuing Bank to obtain authorization. All information about the available balance is located on the card itself in the memory of the built-in chip and is available for reading by the terminal at the point of sale. If necessary, the cardholder can top up the balance on the card from their Bank account either through an ATM, or through one of the terminals in the retail network or Bank branches. Visa Horizon is suitable for cases where there are communication problems or none at all. Since there is no risk of insolvency or overspending due to pre-authorization for this product, Visa Horizon is suitable for customers who do not have a Bank or credit history. In contrast to a card with an electronic wallet, where the balance on the card is prepaid and in case of loss of the card, the customer loses the unspent funds from the card, Visa Horizon allows you to restore the remaining funds on the customer’s Bank account at the time of loss of the card.
The first Visa Horizon card was issued in Ghana in 2000, and today many banks in the CEMEA region are planning to start issuing it.

Visa Cash card (also known as “e-wallet”) is a prepaid card that combines the convenience of payment cards with the security and functionality of a built-in chip. The Visa Cash card is intended for small expenses (buying Newspapers, movie tickets, paying for short phone calls, etc.).
The Visa Cash card can be either top-up or one-time. The decision on this is made by the issuing Bank issuing the card and agreed with the client.

Visa U-Commerce

Today, when the world has become more mobile, there is a need to be able to make payments anywhere at any time and using various mechanisms. The solution can be a merger of electronic, mobile and traditional forms of Commerce, the so-called universal Commerce.
Universal Commerce refers to:
transactions traditionally made in retail and service businesses;
payments by phone, mail, or Fax;
making purchases on the Internet using a personal computer, mobile phone, hand-held radio device or set-top box – the so-called electronic and mobile Commerce (e-commerce, m-commerce);
payments using a mobile phone or laptop computer that send payment information via signals to the terminal, as well as receive a response signal. Visa has already conducted a number of successful test transactions using this method of communication;
payments at self-service terminals such as gas stations, vending machines, and ATMs.

Instant card Visa Instant Issue

Visa Instant Issue*(63) cards first appeared on the Russian market in 2002, when they were issued by DeltaBank. After that, more and more issuing banks announced the start of issuing these cards, so that by the end of 2004, they were already offered to their clients by about 15 Russian banks, including DeltaBank (which remains the leader), the Russian development Bank, the Moscow Bank for reconstruction and development, Guta Bank, MDM Bank, and others.

So, Visa Instant Issue is an international Bank card that does not have the first and last name of the cardholder on the front side. The basic product on which it is implemented is the Visa Electron card. Accordingly, performing operations using it requires authorization regardless of the transaction amount, so this product belongs to the group of products with the lowest risk for the issuing Bank, which facilitates monitoring. A distinctive feature of this type of card is that it is issued to the customer at the time of their application to the Bank (this is why the card data is sometimes called “instant”). At the same time, it is a full-fledged card that allows you to pay for goods and services in trade and service enterprises, to receive cash at ATMs and mobile payment centers equipped with electronic terminals – in short, at all points of reception and service of the Visa Electron card.

In General, the procedure for accepting and servicing cards corresponds to the procedure for working with Visa Electron cards. As we mentioned above, the operation is always authorized. In addition, cashiers must check the standard security elements on the card that are inherent in Visa Electron cards (the inscription “Electronic Use Only”, micro-printing, etc.).

It should be noted that when Visa Instant Issue first appeared on the Russian market, holders of these cards faced certain difficulties. The fact is that cashiers at some points of reception and servicing of Bank cards simply refused to accept cards that did not contain the name of the holder, but thanks to the operational work of the Moscow office of Visa Internationale, Russian acquirers practically eliminated this problem.
How is the Visa Instant Issue issued? At the first stage, there is no data about the client on the map. This means not only the physical issue of the card, but also the appearance of an impersonal card contract in the Bank’s operating system, which contains information such as the card number, its validity period, and the algorithm according to which the corresponding accounts will be opened to the client. As for the card itself, the following information is printed on its front side at the time of issue: the last four digits of the card number (the full number is allowed), the card validity period (may be absent and may not exceed 3 years). Since the card is not personalized at the time of its issue (without the customer’s first and last name), the phrase “Electron Visa Cardholder”is placed on the magnetic stripe in the first track instead of the cardholder’s name.
What happens when a customer contacts the Bank? At this point, the client’s personal data is “linked” to the impersonal card contract that was entered into the Bank’s operating system when the card was issued. To do this, a specific file is created that initiates the personification of an impersonal card contract and the opening of a set of necessary customer accounts in this card contract. This way the card gets its own holder. At the same time, the client can quickly make a Deposit to the account either by depositing cash through the Bank’s cash register, or by transferring funds from other accounts. In accordance with the client’s wishes, cards can be linked to accounts in any currency that the issuing Bank can offer.

The accounting record of card transactions on accounts opened for cardholder clients does not have any fundamental features, but it may have the specifics of accounting used by a particular Bank to record transactions on other card products.
The scope of Visa Instant Issue cards is quite wide. The card can be used as a debit product or as a credit card. At the same time, issuing banks can use it to solve various tasks, for example, the task of organizing more productive communications with customers in the case of territorial remoteness of their product sales sites. A Bank that has an extensive network of branches and performs card personalization centrally, using this product, can produce cards in the Central office and then send them to the branches. Thus, customers who cannot or do not want to wait several days for the card to be produced and delivered to their place of stay can get a full international Visa card within a few minutes. At the same time, the technical equipment of the branch does not matter, because when working with clients who are sold instant cards, you can do without special software. Another application of Visa Instant Issue is credit cards. To date, a credit card based on instant is a unique product on the Russian market and is very popular among buyers of shopping centers (where sales of such cards are successfully made). In this case, there is a clear interest of all parties in their presence – both the Bank (growth in product sales), the point of sale (growth in product sales), and the client (the ability to instantly get a loan for the purchase of a favorite product).

MasterCard payment system

History of the company in June 2001, the world announced the beginning of the merger of two major international companies and payment systems in the United States and Europe – Europay International and MasterCard International. As a result, on July 1, 2002, a new company appeared on the international card market – joint-stock company MasterCard Incorporated, which included MasterCard International (as the main operating unit) and Europay International (as one of the regional units), and a single MasterCard logo appeared on plastic cards.

The forerunners of the new giant of the international card industry began their development in the mid-60s of the last century, and the beginning of their cooperation dates back to that time.

The year of creation of the international payment system Europay International is considered to be 1964, when the Swedish Bank Wallenburg established the company Eurocard, and in 1965 Eurocard is reorganized into a joint-stock company EuroCard International with headquarters in Brussels.
The history of MasterCard International’s formation begins in 1966, when several banks from the East coast of the United States created an Interbank card Association (ICA) and began issuing cards under their own program. Unlike other card associations, the ICA did not have a single dominant Bank. The Association was governed by a Board of authorized representatives of the Association’s members. The organization’s headquarters were located in new York state. The following year, four major banks in California created the Western States Bankcard Association And launched the MasterCharge card program. In 1968, ICA began its expansion. Its first steps in this direction are the creation of an Association with Banco Nacional, Mexico city and the merger with MasterCharge. As a result, by 1970, MasterCharge cards were in circulation in 49 States only in the United States. In 1979, the combined company was renamed MasterCard International.
Initially, both Europay and MasterCard focused on customer service in their respective regions: Europay worked more in the Old world, and MasterCard – in the New. But in 1968, the first strategic Alliance was concluded between them, aimed at the establishment of Eurocheque, designed to get customers money abroad and expand the scope of service to their customers. At the same time, the first Japanese participants joined the Association.

Two decades later, in 1988, in order to strengthen the Alliance, MasterCard acquired a 12.25% stake in EuroCard International and 15% of the assets of its technology division EPSS (European Payment Systems Services).
Since 1991, as a result of an agreement between EuroCard International and Cirrus International, cards with the Eurocard/MasterCard logos have been accepted in the Cirrus ATM network.

In 1992, as a result of an equal partnership between MasterCard and Europay, Maestro International was created, and EuroCard International, eurocheque Int. and Eurocheque International Holdings merged into Europay International.

1996 was marked by a new 10-year strategic cooperation agreement between MasterCard and Europay, which resulted in a new combined logo for Eurocard/MasterCard cards.

In 1997, the first ever international Internet transaction was made using Eurocard/MasterCard cards.

At the end of 2000, participating banks were given the opportunity to implement a new virtual card program. The virtual card was an additional account opened for Eurocard/MasterCard cardholders in order to differentiate payments made in the real world and in the e-Commerce market.
In 2001, the world released one hundred millionth Eurocard/MasterCard chip card.
Thus, the final merger of Europay International and MasterCard International was a natural result of close cooperation that lasted for more than 30 years and allowed us to create a strategic Alliance to increase their competitiveness in the international payment card market.

We also note the following fact: in the spring of 2004, the North American franchise Diners Club International (DCI) – Diners Club North America and MasterCard International signed a framework agreement to create a new strategic Alliance. At the first stage of the project, DCI cards issued worldwide will be served in the MasterCard International acceptance network in Canada and the United States. In the next stage, Diners Club International cards issued in the North American region will be accepted in the global Network of MasterCard terminals, ATMs and cash points around the world.
for this purpose, the MasterCard logo is applied to the issued DCI cards, which eliminates the possibility of refusal to accept them in the trade and service companies that service MasterCard cards. At the same time, Diners Club cards issued in the United States and Canada will have the logo on the front side, and cards issued in other regions will have the logo on the back side. And although, according to the Diners Club management, there is no question of any merger or mutual absorption of the two international systems, time will show what further changes in the global card market will lead to the creation of such an Alliance.

The structure of the company and its objectives

The newly formed MasterCard Incorporated holding company includes a subsidiary (MasterCard Int.) and five regional divisions that operate in six regional areas: North America, Europe, Asia-Pacific, Latin America and the Caribbean, South-East Asia, the middle East and Africa. This structure assumes operational management of the current activities of such a large company. The creation of a single structure with a single management and management allowed MasterCard to achieve “great flexibility and strategic maneuverability”, as well as speed up the process of offering new technological services to customers. The headquarters of the newly formed organization is located in the city of Purchase (new York, USA).

The headquarters of the European branch of the company is located in the headquarters of Europay International in Waterloo (Belgium), and Europay Int. itself became a regional division in the new structure-MasterCard Europe Region. The new company’s shareholders were financial institutions that are key participants in the payment system.
The consolidation of companies into a single structure was primarily focused on the implementation of the following tasks:
increasing the competitiveness of the new company in the international market. In practical terms, the predecessor companies had one serious competitor – Visa Int., and the merger already gives a tangible strengthening of MasterCard’s market position in the fight against its rival;
reducing costs by unifying standards in card servicing and processing completed transactions, as well as eliminating single-profile administrative divisions and functions in the company’s business structure;
optimization of the terms of development and implementation of new products and services for customers, in particular, the use of previously existing developments of each of the companies. For example, Europay International had experience in the successful implementation of card transfer programs to EMV technologies, and MasterCard International had significant achievements in the implementation of card technologies in the e-Commerce market, including the development of security standards SET (Secure Electronic Transaction) and SPA (Secure Payment Application), as well as credit cards (revolving lending);
activation of work with participants on the transition to EMV-compatible card issuance, re-equipment and modernization of POS-terminals and ATMs to accept chip cards.
One of the first steps of MasterCard was to create three global centers of excellence. The main task of creating centers is to develop and create new card technologies and products that best meet the modern market and the needs of payment system participants. Two such centers are located in Belgium, and one in the United States. European centers are formed in the field of debit products, chip technologies and mobile Commerce. In the United States, the center of excellence will focus on issues related to the development of new products and the promotion of card technologies in terms of e-Commerce and B2B relationships.

Consistent implementation of the tasks set allows MasterCard International to significantly increase the efficiency of its activities in the market of international plastic cards, which is shown by the results of Its activities.