Discussion Chapter on "EMV Standard Implementation in Iranian Banks Risks"

Discussion Chapter 9 pages (2295 words) Sources: 3

[EXCERPT] . . . .

EMV standard Implementation in Iranian Banks Risks & Challenges

Challenges

In regard to the isolation of the various challenges that affect the migration process to the new EMV standards. The majority of the Iranian banks cited the coping with the new card system/updated application to be the most significant challenges (25%).This is in tandem with the results found regarding the area that took most time (update infrastructure-85%) as well as the aspect of implementation which has the highest cost (upgrading and change of infrastructure-62%).The interpretation for this is pattern is that the migration to the EMV platform is a costly and time consuming exercise that involves the acquisition of the latest equipment and skills. The Iranian banks must therefore seek assistance from foreign nations who have already successfully rolled out or rather migrated successfully to the EMV system.It is prudent to consider the fact that the challenges faced by other countries in the adoption of the EMV technology can be faced by the Iranian banks too. This therefore brings to mind the Canadian case of EMV adoption. It is worth noting that a significant amount of threat to the EMV migration process is mainly in the area of both contactless and wireless payment systems (Researchmarkets,2007)

The fact that most Iranian banks (about 63%) have indicated that an intricate understanding of the requirements was a major and significant factor in the implementation of the EMV standards with a quarter of the banks reporting to have a great level of difficulty in the implementation of the EMV standards' requirements can be attributed to various reasons. This coupled with the fact that a few of these banks reported to have some sort of difficulty means that the Iranian banks are not prepared to rapidly evolve with the latest technology such as e-banking (Aghdassi et al.,2010). This is despite the fact that technological developments in terms of viable information technology projects are currently revolutionizing the banking industry through the enabling of paradigm shift in the way business is conducted (Sohail & Shanmugham 2003).In order to gain an intricate understanding of the EMV standards, it is important that the Central Bank of Iran with the help of the relevant stakeholders come up with very strict guidelines on how to implement the EMV standards. This should therefore make it possible to come up with certain specific goals and steps to be followed in order to bring the EMV standards into the Iranian financial institutions. It is therefore necessary for the Iranian banks to comply with the requirements that would enable them to effectively adopt the EMV system into their financial system. This can partly be attributed to the perceived difficulty in migration as outlined by Povey (2008) entailing the need of not only implementing the new technology independently but also re-engineering the entire business model as well as training and retraining of the staff. The need of improved communication systems is also envisaged with this change/migration. In a nutshell, the need of too much resources is considered a burden as well as a threat by Iranian banks as a result of the fact that most bank are usually concerned about their bottom lines as opposed to dealing with extant problems irrespective of their perceived levels of importance to the entire global banking system and security.

The Iranian banks must realize that the process of migrating to the EMV standards is an on-going process that must be approached cautiously and with the right tools and framework. In order to successfully adopt or rather migrate into the new system, they should follow the crucial steps as outlined by Beatty (2003).The following should be considered by the banks;

The carrying out of risk management procedures as well as appropriate determination of the usage parameters so as to come up with an approximate behavior of the card-This is in order to determine where and how the card holders will be able to use the cards.

The targeting of high-risk cardholders in order to capture more online card transactions

The implementation of the EMV technology in the mode of card payment that are located in relatively new and normally unattended fraud-prone locations such as unmanned gas stations as well as other unmanned locations through the use of an offline card as well as cardholder authentication framework. This is in a bid to create more terminals that would lead to more transactions and subsequently more revenue being generated.

Stakeholder identification

A stakeholder is a person or an organization that is actively involved in the running of a project or may be affected in one or more ways by the execution of a project or its completion (Taylor,2004).There are two categories of stakeholders that must be identified. These are;

Members of the EMV implementation team

Customers to the Banks

Financial managers

Users of the system

Suppliers

The second category of stakeholders is not easy to identify; they include but are not limited to the following;

Bank's shareholders

Local as well as federal regulating bodies

Various creditors

Environmental groups etc.

On the issue of identification of stakeholders to aid in spearheading the EMV migration exercise, it is true that none of the participating banks had an easy task. This is generally true as a result of lack of proper and well established goals, objectives as well as strategy regarding the process and outcomes of the proposed EMV migration. This is important as pointed out by ChasePaytech (2010).It is worth noting that the process of identifying true stakeholders is not easy. It is important to note that the success of the EMV migration process can only be assured only if the real shareholders have been involved in the project. This is because their need s must first be met for a project to be successful (Haughey, 2010).This is backed by the fact that their presence in the implementation of the project has both direct and indirect effects on the project itself.

Furthermore, the amount of effort needed to update payment infrastructures varies from market to market. As an example, there have been difficulties in meeting timely deployment standards because a country market is held by only one or two suppliers. Additionally, the upgrades of the payment infrastructures are limited to the efforts of the entire set of stakeholders. While EMVCo, as a standard-setting organization, has provided guidance and specifications, it is up to issuers and merchants to play their role. Most of issuers and merchants recognize its importance, but have their own obstacles (Povey, 2008).Thos clearly illustrates the fact that the stakeholders are a crucial element in the migration to the EMV system of payment.

The majority of Iranian banks (87%) agreed that the process of identifying EMV current budget is a significant challenge. However, 13% of participants said it is extremely significant challenge.

This can be attributed to the fact that EMV is a totally new technology to the Iranian banks and therefore it is entirely difficult to estimate the actual cost of its implementation in the Iranian financial scenario. Some of the banks have very strict policies regarding the divulgence of highly sensitive financial data to the researchers. This therefore presents a general challenge to the process of identifying the current budget that the Iranian banks spend on the implementation of EMV infrastructure. The budgetary nightmare is mainly as a result of Iran's poorly managed financial system as well as a flawed fiscal and monetary policy as pointed out by Amir (2009).It is common knowledge that the Iranian monetary system is a bluff. It is imperative that the migration to the new EMV platform be punctuated with a total overhaul of the current financial system as well as appropriate modification of fiscal and monetary policies. It is important to point out the main roles that are played by the banking and monetary system to the Iranian economy. They are;

The improvement of economic strength and efficiency

Ensuring the price stability

Facilitating production

Ensuring economic growth

The main function however is the provision of fiscal resources in order to prepare the ground for the maximum allocation of capital in the Iranian economy. This aids in the distribution of wealth in the best manner so as to ensure that the Iranian capital markets that are underdeveloped get a chance to be uplifted (Amir, 2009).

The EMV standards have indeed helped in the facilitation of faster speeds of payments. However, the adoption cost is one of the major obstacles on the way to EMV. Fraud reduction is one of the most important solutions that EMV provides. This has encouraged several countries to migrate to EMV, certain markets such as the United States who found out that the migration to EMV which would include the cost of transferring the existing infrastructures to be compliant with EMV standards would surpass the current cost of fraud (Sullivan, 2008).This gives a reason why it is necessary to ensure that both the pre-EMV migration and post EMV-migration budgets are well prepared to ensure a successful implementation of the project.… READ MORE

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