The road to EMV migration in the U.S. has been a rocky one. With complications stemming from federal regulations and ATM compatibility issues, migrating from the mag-stripe cards we rely on today to new chip card-based technology is proving a complex and costly undertaking.
But with partners like MasterCard and Visa making headway in the EMV migration, it’s time to get ready. Read this blog to find out what challenges and considerations banks like yours are facing in the great migration from mag-stripe cards to EMV chip cards.
Payment Network Option Requirements
Perhaps one of the greatest obstacles EMV migration must overcome is updating current U.S. payments processing systems to be compatible with EMV technology.
Under Regulation II—also known as the Durbin Amendment—debit cards are required to maintain a minimum of two unaffiliated payment network options that are available to merchants for use in payments processing.
With EMV transactions, the ability to route transactions depends on the payments applications that are loaded to the chips and can be selected during processing. While card associations support EMV applications, many regional or pinned networks—which most issuers use as their secondary payment networks—initially did not. This prevented issuers from rolling out “Durbin-compliant” debit chip cards; however, many pinned networks have cross-licensing Visa and MasterCard EMV applications to meet the compliance standards.
ATM Compatibility with EMV
Another important element to consider is EMV acquiring at ATMs. Advanced terminals and readers that are capable of interfacing and receiving the credentials from chip cards must be deployed to enable EMV. But there are several factors to consider before updating the U.S. ATM fleet:
- EMV Terminal Needs
EMV card readers typically interface with cards by maintaining physical contact with the chip on the front of the card when inserted in an ATM, as opposed to reading the “swiped” mag-stripe on cards currently in use. Some EMV cards even support wireless or contactless interface to transmit and receive credentials. This technology will mean upgrades to most current ATMs.
- Customer Experience at ATMs
There are two types of card readers capable of EMV: motorized-insertion readers and “dip-and-clip” readers. Motorized-insertion readers will continue to operate as they do today. But with dip-and-clip readers, customers must remove their cards before receiving instructions to re-insert and leave their cards in the readers during the entire transaction. This change will require customer re-training, because if customers forcibly remove cards after re-insertion, clips could be damaged.
- ATM Upgrade Expenses
It’s estimated that upgrading ATMs across the U.S. could cost upward of $500 million. If your bank’s ATMs need upgrades, you may want to start planning now. And if you’re already in the process of updating your ATMs—or are considering it—you should contact your terminal vendors to determine potential expenses.
- Fraud Liability Shifts
Today, with a mag-stripe ATM transaction, the card issuer is liable for fraudulent activity. But when EMV fraud liability for ATMs shifts (some as early as Oct. 2016), bank ATM owners will be liable for any fraudulent activity occurring on EMV-enabled chip cards if the ATM is not EMV-enabled. While ATM-related fraud is relatively low, you may want to consider the possibility of these related fraud losses before upgrading or enabling EMV acceptance at your ATMs.
What’s Your Next Move?
For many banks like yours, the most important question for EMV migration is timing—when should your bank jump in? The answer will vary for each bank. Market conditions, fraud liability shifts, card replacement strategies and customer demographics all play a role.
Check out the final installment of CSI's EMV blog series to learn more about what Rolling Out EMV at Your Bank could look like.
Derrick Bretz leads strategic product development and quality improvement initiatives within CSI Payment Services. In his role, Derrick enhances payment and commerce experiences and customer education through the use of data analytics. Having helped develop CSI’s initial mobile offerings, Derrick continues to provide leadership on mobile commerce initiatives.