Visa paywave Implementation Overview and European Pilot Operating Principles Member Letter: VE 08/08 Type: General 16 April 2008

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1 Principal and Group Members Centre Manager Senior Visa Officer Marketing Staff Visa paywave Implementation Overview and European Pilot Operating Principles Member Letter: VE 08/08 Type: General 16 April 2008 IN BRIEF: In order to address increasing Member demands and facilitate Visa Europe Contactless Payments programmes with Members across the region, Visa Europe Contactless Pilot Operating Principles are now available. Appendix A provides an overview of the issuer and acquirer implementation steps and available supporting documentation for Members seeking to implement Visa paywave. The Visa Europe Contactless Payment Pilot Operating Principles outlined in Appendix B were approved at the October 2007 Visa Europe Board of Directors meeting. In June 2007, Visa International Board of Directors agreed to modify the qualification criteria for the full chip inter-regional interchange reimbursement fee (IRF) in order to allow contactless transactions acquired using full chip data chipreading devices, to qualify for the acquirer full-chip incentive fee. These changes are detailed in Appendix C. ACTION REQUIRED: All Visa Contactless activity in the Visa Europe region must operate to the Visa Europe Contactless Payment Pilot Operating Principles.

2 Introduction Visa paywave provides a new way for cardholders to pay for low-value, everyday purchases in less than a second. It is ideal for low-value retailers such as fast food outlets, supermarkets, convenience and express stores, cafes, newsagents, buses, trains and parking machines. Visa paywave enables cardholders to make contactless payments using a specially adapted credit, debit or prepaid card. An antenna is embedded in the card, which communicates with the payment terminal. Cardholders do not need to insert their card into a terminal, sign their name or enter a PIN. Instead, they simply wave their card in front of a special Visa paywave reader. Transactions take place securely in less than a second. Visa paywave supports all Visa products including Visa Electron and V PAY. In order to assist members in planning in implementing Visa paywave programmes, several relevant documents have been consolidated in this letter. Appendix A provides an overview of the implementation steps and lists the documentation available for Visa Europe Members seeking to pilot or roll out Visa paywave. It is a reference to help guide Members through the planning and implementation process. Appendix B provides the Visa Europe Contactless Pilot Operating Principles 1 that govern all Visa paywave activity in the Visa Europe region, as approved at the October 2007 Visa Europe Board of Directors meeting. Appendix C details the qualification criteria for the full chip inter-regional IRF in order to allow contactless transactions acquired using full-chip data chip-reading devices, to qualify for the acquirer full chip incentive fee. These were agreed by the Visa International Board of Directors in June If you have any questions regarding this letter please contact Visa Customer Support on your country specific number or customersupport@visa.com. Mariano Dima Executive Vice President Marketing and Payment Solutions 1 Note that this document refers both to Visa paywave and Visa Contactless. For clarification, Visa paywave is used whenever the product is envisioned as a member, cardholder and retailer proposition whereas Visa Contactless is the term used in technical documents and in the Operating Principles.

3 Appendix A Visa paywave Implementation Overview In principle, Visa paywave is technologically a small incremental extension of EMV chip technology and Members that are familiar with EMV should find that a relatively small effort is required to extend their systems to support Visa paywave. To facilitate the implementation process, the following implementation overview is an overview of the steps that issuers and acquirers need to follow in order to launch a Visa paywave product. Definition Stage Prior to initiating any implementation of Visa paywave, Visa Europe recommends a definition stage to align business, technical and operational objectives. Business Case The business objective of Visa paywave is low-value cash displacement and in order to ensure maximum cardholder and retailer acceptance and usage, in most domestic markets a degree of co-ordination is required between issuers and acquirers in most domestic markets. For these reasons, Visa Europe recommends that Visa paywave implementation is driven by a medium-to-long-term business case taking into consideration the anticipated rollout of the technology among key domestic retailers and cardholder segments. Cardholder and Merchant experience From a consumer positioning perspective, Visa paywave competes directly with cash for low-value payments. In order to achieve success, Visa paywave must deliver a consistent, strongly compelling cardholder and merchant experience domestically and across the European market. The product rules therefore state that domestic Visa paywave transactions should be offline, below a commonly agreed domestic floor limit and without PIN. Technology Also in the short-to-medium term, Visa Europe anticipates that the dual interface card (i.e. payment card that supports both contact EMV and contactless payments using a single chip) is the only form factor that can achieve mass market deployment while conforming to SEPA requirements and leveraging the existing EMV chip technology base. In the future other devices such as the mobile phone will mature for mass deployment and can be introduced into the market. Visa Europe therefore recommends that Members build their initial business case based on a dual interface card product. Once the Definition stage is completed, Members seeking to initiate a Visa paywave project should contact their Visa Europe Relationship Manager and request that they open a project in Clarity 2 and obtain a Visa Europe project manager. This will initiate the formal project cycle. 2 In some markets (eg UK) Members need to open clarity projects themselves. If there is any uncertainty please contact your relationship manager.

4 Issuer Implementation Considerations Visa paywave requires an upgrade on the issuer host system as well as several significant changes to card production. As with any new card product there are also marketing and operational impacts to be considered. Full details are available in the following documents: Visa Europe Contactless Payment Pilot Operating Principles (see Appendix B of this letter) Visa paywave Member Implementation Guide for Issuers (available on Visa Online) 3 Visa Contactless Payment Specification (if needed, available upon request from contactlessve@visa.com) Visa paywave guidelines and Contactless Indicator requirements (available on the Product Brand Standards website, Card Production Vendor Selection A range of card vendors can provide issuers with a card product that supports Visa paywave. It is important to ensure that the specific product under consideration is approved for use in the Visa Europe region (some products are only approved for use in other regions). Issuers must obtain from potential card vendors the official Letter of Approval from Visa Inc. Approval Services confirming that the specific platform is approved for the Visa Contactless Payment Specification v qvsdc and MSD. Card products that do not have this approval cannot be used in the Visa Europe region. Card Design As Visa paywave cards must have the Contactless Indicator on the card and may incorporate the Visa paywave name, a new card design approval is required as per the standard Visa Europe process. The Visa paywave guidelines and Contactless Indicator requirements lists the new requirements. Artwork can be downloaded from the Visa Marketing Solutions website ( Please note that the Contactless Indicator itself is an industry standard managed by EMVCo and the print-resolution image can be downloaded from Personalisation Profile Issuers need to set up the personalisation parameters for Visa paywave cards based on their risk management preferences for contactless transactions. For detailed information on the available options, consult the Visa paywave Member Implementation Guide For Issuers. A recommended personalisation profile is available upon request from contactlesstest@visa.com. 3 Version 2 of the Visa paywave Implementation Guide for Issuers is available on VOL.

5 As stipulated by the Visa Europe Contactless Pilot Operating Principles, issuers must have their Visa paywave personalisation profile approved by Visa Europe prior to issuance. Issuers should contact to obtain details of the personalisation approval process. Issuers are also required to send ten test cards for each personalisation profile to Visa Europe for personalisation validation. These cards will be retained by Visa Europe for ongoing interoperability testing. These cards must be sent to your assigned Visa Europe project manager prior to launch. Visa Europe also offers an optional in-market evaluation service where issuers can have their cards tested in live Visa paywave terminals and all other live environments across the Visa Europe region. This provides issuers with an added level of confidence for their initial launch and can help to pinpoint any acceptance issues before full rollout. For further information please contact Note: Visa branded cards must support both qvsdc and MSD profiles; V PAY cards must support only qvsdc. See the Visa paywave Member Implementation Guide For Issuers for further details. Issuer Host System Development In order to support Visa paywave transactions, some issuer host development is required. Requirements are documented in the Visa paywave Member Implementation Guide For Issuers. Prior to launch, the issuer host system must be certified by Visa Europe. Your assigned Visa Europe project manager will provide the necessary test scripts upon request and must receive the issuer test cards to perform the certification. Issuers are strongly recommended to request a certification slot early on due to current lead-times of up to six months. Following successful certification, issuers should work with their project manager to confirm the final go-live date and define the Visa system core and configuration settings. Acquirer Implementation Considerations Visa Europe acquirers seeking to implement Visa paywave acceptance must upgrade their host systems and provide their merchants with approved Visa paywave terminals. Full details are available in the following documents: Visa Europe Contactless Payment Pilot Operating Principles (see Appendix B of this letter) Visa Europe Visa paywave Member Implementation Guide for Acquirers (available on Visa Online) Visa Europe Contactless Terminal Requirements and Implementation Guide (available upon request from contactlessve@visa.com) Visa Contactless Payment Specification (if needed, available upon request to contactlessve@visa.com) Visa International Approved Chip Card Devices Supporting Visa Contactless Payments and/or Visa Approved Chip Card Reader Components Supporting

6 Visa Contactless Payments (both updated regularly and available from Contactless Symbol at POS guidelines (download from Visa paywave at POS guidelines (download from Visa Point-of-Sale Graphic (download from EMVCo Contactless Indicator Reproduction Standards for Cards and Payment Devices (download from Terminal Implementation Once an approved terminal has been selected and adapted by the vendor for acquirer implementation it must pass the Visa paywave Test Pack (VpTP) testing before it can go live. Acquirers should contact the Visa Europe testing team at to obtain test cards and co-ordinate the testing. Following successful completion of the testing, acquirers must send a reference terminal (to be retained by Visa Europe for ongoing interoperability testing) to their assigned Visa Europe project manager prior to launch. Terminals must conform to the relevant user interface and brand standards detailed in the following: Visa Europe Contactless Terminal Requirements and Implementation Guide Contactless Symbol at POS guidelines Visa paywave at POS guidelines Visa Point-of-Sale Graphic and EMVCo Contactless indicator Reproduction Standards for Cards and Payment Devices. Host Certification Details of the required changes to the acquirer host system are provided in the Visa paywave Member Implementation Guide for Acquirers. Acquirers seeking to implement Visa paywave should inform their Visa Relationship Manager to ensure that a Clarity project is opened and a Visa Europe project manager assigned. Your Visa Europe project manager will provide the relevant test scripts. Acquirers are strongly recommended to request a certification slot early on due to current lead-times of up to six months. Launch Once the relevant systems changes have been made and the certification is completed, Members are technically ready to launch. In parallel to the systems development activity, as with any new product, we recommend that appropriate marketing and operational preparations are created. Issuers who are seeking general consumer rollout should develop appropriate consumer propositions and a launch plan including consumer communications and customer service. We recommend that issuers inform their Relationship Manager, so that Visa Europe can

7 provide appropriate advice and support as well as co-ordinate with other marketing and promotional activity that may be underway. Acquirers should develop a merchant acquisition and communication strategy as well as terminal installation support and post-implementation merchant technical support. The success of an issuer launch will depend closely on parallel acquirer rollout. If appropriate, Visa Europe can facilitate a co-ordinated domestic rollout between multiple issuers and acquirers. A variety of information is available from Visa Europe to support the product definition and business case development phase including cardholder research in several European markets. For more information, contactlessve@visa.com.

8 Appendix B Visa Europe Contactless Payments Pilot Operating Principles Visa Europe Contactless Payments Pilot Operating Principles and Contactless Transaction Disputes Resolution Module were approved at the October 2007 Visa Europe Board of Directors meeting with immediate effect. Purpose The purpose of the Visa Contactless Pilot Operating Principles is: To serve as a model for Members to establish an appropriate domestic framework together with other Members operating in their respective countries. To establish a framework for intra-regional Visa Contactless transactions To ensure that as Visa Contactless is deployed in the Visa Europe region, there is a single common cardholder, retailer and member implementation in order to prevent divergent solutions from developing in different markets that would make future interoperability difficult to achieve It is envisaged that after a period of pilot activity in various European markets, sufficient learnings will be gained to formalise intra-regional inter-regional Operating Regulations for Visa Contactless Transactions. The Visa Europe Contactless Payments Pilot Operating Principles shall govern Visa Contactless activity until such time. Visa Europe Contactless Payments Pilot Operating Principles The contactless single transaction limit shall be This limit will be reviewed periodically Contactless transaction(s) must be EMV based and processed using POS entry mode 07 Proximity Payment (Chip Card) The Issuer is liable for all contactless Transactions unless a valid Chargeback right exists as detailed in Appendix B Acquirers are liable, under existing Chargeback dispute rights, where a transaction(s) exceed the Contactless Single Transaction Limit 5 and / or are not profiled with POS entry mode 07 Proximity Payment (Chip Card) Acquirer Requirements Visa Contactless acceptance devices must be approved by Visa International for use in a live environment. Approved products and their Vendors are listed on the Visa International website 4 i.e. up to an including 20 5 i.e. values of and above

9 Acquirers must support Visa International global interoperability within the context of their contactless implementations. Specifically, online capable acceptance devices shall support online contactless transactions when requested by the card Acquirers must implement the contactless single transaction limit, specifically: 1. Contactless acceptance devices shall permit transactions over the contactless interface up to and including the value of the contactless single transaction limit 2. Contactless acceptance devices must not permit transactions over the contactless single transaction limit to be performed over the contactless interface. Such transactions may be performed as contact EMV transactions, or fallback to magnetic stripe interface if EMV is unavailable 3. Acquirers are not required to support CVM for contactless transactions up to and including the value of the contactless single transaction limit 4. Acquirers must not offer the Dynamic Currency Conversion (DCC) service on Contactless transactions A Transaction Receipt must be provided upon request (if available) for the value of the transaction. The receipt must indicate a Visa Contactless transaction Acquirers must ensure that, contactless acceptance devices conform to the Visa Europe Terminal Requirements and Visa paywave Implementation Guide For Acquirers to ensure a consistent customer and retailer experience. Devices must be submitted to Visa Europe for approval in this respect Refunds for transactions made originally via the contactless interface may be made via the contactless interface in addition to the other existing methods. Regardless of how the refund transaction is processed, the Acquirer must ensure that the original qualification criteria are included in the message Visa contactless transactions must be submitted for clearing and settlement no more than two (2) calendar days after the transaction date Contactless enabled acceptance devices must display the contactless symbol

10 Issuer Requirements Visa contactless cards must be approved by Visa International for use in a live environment. (See Issuer Requirements section in Appendix A) Issuers may only deploy Visa Contactless on a dual interface card platform 6 Issuers must configure cards not to request CVM for a contactless transaction Contactless enabled cards must display the Visa contactless indicator. As per existing Operating Regulations, Members must submit proposed designs for all cards to Visa Europe Issuers must configure cards to : 1. ensure contactless transactions are processed offline in the domestic environment wherever offline acceptance is possible 2. support cumulative offline contactless transactions of an amount equal to at least three times the contactless single transaction limit 3. support icvv for qvsdc transactions and either icvv or dcvv for MSD transactions 4. Ensure personalised cards meet the Visa contactless performance criteria Issuers must submit sample cards to Visa Europe for personalisation and performance validation prior to commercial issuance. Visa Europe will retain these cards for future interoperability testing. Please note that any subsequent changes to a card platform or personalisation will require re-submission to Visa Europe Issuers shall not request a referral for online authorised contactless transactions below the contactless single transaction limit Visa Europe Contactless Payments Disputes Module The following dispute resolution rules shall govern Visa Europe Contactless transactions: The Issuer is liable for all Contactless Transactions unless a valid Chargeback right exists as detailed in the table below. Transactions which exceed the 20 maximum transaction amount for a contactless transaction, (i.e and above) and / or are not profiled with POS entry mode 07 Proximity Payment (Chip Card) will default to the existing set of dispute rights detailed in the Operating Regulations. If you have any questions regarding the dispute resolution process with regard to these pilot operating principles, please contact the dispute resolution team at disputes@visa.com. NB. Any disputes are valid for the entire Transaction amount. It is assumed that: 6 i.e. cards that support both contact and contactless interaction with acceptance devices

11 All Contactless acceptance devices will be Visa compliant, e.g. conform to the Visa Europe Contactless Terminal Requirements and Implementation Guide. All Visa contactless cards will be compliant with Visa Contactless card specifications. The following table lists the only Chargebacks that apply to contactless transactions. Visa Europe Contactless Chargeback Reasons Reason Code Time Limit (Calendar Days) Services not Provided or Merchandise not received* Not as Described or Defective Merchandise* Declined Authorisation No Authorisation Late Presentment Duplicate Processing Credit not Processed Footnotes: * Chargeback Reason Codes 73, 77 and 80 do not apply to Chip Initiated Transactions and will not available on Visa Europe Contactless Transactions, because all valid transactions will be Chip-Initiated and contain a valid cryptogram. * Due to the nature of contactless transactions, it is envisaged that Chargeback Reason Codes 30 and 53 will be very rarely required. However, they could become applicable in scenario(s) where say a Contactless Transaction is used as a deposit for a larger ticket item with a delayed delivery element, and subsequently, the goods are not received.

12 Appendix C Contactless Inter-regional Interchange Reimbursement Fee Extension Summary: Effective 5 April 2008, the qualification criteria for the full-chip inter-regional interchange reimbursement fee (IRF) will be modified to allow contactless transactions, acquired using full-chip data chip-reading devices, to qualify for the full-chip fee. No specific Member action is required Background At its meeting in June 2007, the Visa International Board of Directors agreed to modify the qualification criteria for the full-chip inter-regional IRF in order to allow contactless transactions acquired using full-chip data chip-reading devices, to qualify for the acquirer full-chip incentive fee. The current chip inter-regional IRF structure has been in effect since April Under this structure, support of full-chip data is part of the qualification criteria for the acquirer incentive full-chip inter-regional IRF rate. Contactless Transaction IIRF In view of the expected increase in the implementation of contactless technology, an IRF incentive fee for contactless transactions at full-chip data chip-reading devices was required. Extending the chip IRF structure to include contactless transactions originating from chip-reading devices will support the projected increase in contactless transactions. Additionally, this extension will contribute to continued growth in the deployment of Visa contactless acceptance devices. Member Impact Effective 5 April 2008, the existing full-chip data acquirer IRF rate of 1.00 per cent will apply to inter-regional contactless transactions originating from full-chip data chip-reading devices. In order to qualify for the full-chip IRF, contactless transactions must meet all the existing qualification criteria for full-chip data acquirers. There are no changes to the qualification criteria for EMV contact chip cards. If you have any questions regarding this letter please contact Visa Customer Support on your country specific number or customersupport@visa.com.