Tuesday, August 12, 2014
The card brands have mandated an October 2016 deadline for bank and off-premise ATMs to be Europay/MasterCard/Visa (EMV) chip card enabled. But ISOs that operate ATM networks are reportedly being forced to a play a waiting game as the other constituents in the value chain decide how to proceed in their EMV implementations.
According to a July 2014 white paper sponsored by the ATM Industry Association and off-premise ATM network operator Kahuna ATM Solutions, ATM ISOs, and others categorized as independent ATM deployers (IADs), are in limbo because issuing banks on one side and retailers on the other are in charge of how fast, or how slow, the transition of ATMs to the EMV standard proceeds.
"The real answer is that the IAD community is waiting for EMV cards to be issued," said Kahuna President Bryan Bauer in Cardless ATMs: Are Mobile Transactions the Future of the ATM Industry. "IADs are waiting on the banks and credit unions, and the banks and credit unions are waiting on the retailers."
It is an awkward position to be in because IADs don't know what kind of EMV technology to adopt for their ATMs until financial institutions (FIs) make up their minds about what type of EMV chip cards to issue. "Until they decide what types of EMV-compliant technology options they want to deploy, IADs will have to either roll the dice or take a wait-and-see approach," the report said.
Certainly, neither option seems ideal. But IADs cannot be blamed for not making costly EMV investments without a definable roadmap. Unfortunately, FIs are still wrestling with defining it. Bauer said banks and credit unions have yet to figure out EMV, adding that many FIs are leaning on their debit networks to show them the way.
The lack of action appears to be influenced by how to factor in mobile contactless transactions at ATMs. Issuers see consumers eventually foregoing EMV chip cards and using their mobile devices to withdraw cash from ATMs. While this activity may not be widespread for years, issuers are worried they will be making unwise investments if they don't account for mobile commerce at ATMs now. The problem is that neither EMV chip card nor cardless technology have been instituted.
"Right now, the U.S. payments industry is focused on EMV," Bauer said. "EMV is still a ways out, but that has always been seen as a gateway to including cardless capability. ... Contactless or cardless transactions will surely follow; it has in all other countries that expanded their offerings, once they crossed the hurdle of EMV."
The white paper said a few banks, such as Atlanta-based SunTrust Banks Inc., have started migrating ATMs to accept mobile transactions by means of quick response (QR) code technology. "QR codes, which are generated when an ATM transaction is initiated, are typically texted to a user's mobile device and then scanned at the ATM in order to authenticate the transaction," the report said.
A potential new use case for mobile payments-enabled ATMs is in the area of bank loans. Min Kye, Retail Division General Manager at South Korea-based off-premise ATM manufacturer Hyosung Corp., laid out a loan application process where loans can be approved online and downloaded to mobile devices that can then be used to withdraw loan amounts in cash from ATMs.
In the white paper, Pamela Phillips, Vice President of Affiliate Department at Kahuna, said IADs will play a supporting role in the EMV rollout, rather than a leading one. However, IADs can differentiate themselves from the competition by staying abreast of EMV developments so they can be first-to-market when EMV takes hold.
Bauer said IADs should be talking with potential FI partners today. "Start with communication – just knowing when cards are issued would help," Bauer said. Wes Dunn, Vice President of Sales for retail ATM manufacturers Genmega Inc. and Hantle Inc., added that IADs should also be in communication with manufacturers to determine the EMV specifications, and related specs for contactless, near field communication payment technology, for new terminals being deployed.
IADs are further advised to communicate with their affiliated merchant acquirers because those processors are in constant communication with card brands concerning EMV. But the time is now for ATM ISOs to act.
"Communicating now with manufacturers about future terminal ordering expectations is more critical than most IADs understand," said James Phillips, Vice President of Sales and Marketing at off-premise ATM manufacturer Triton. "Manufacturers can only inventory so much stock. In the case of EMV, this could put IAD businesses at risk for fraudulent activity.
"I would urge every IAD to put a plan in place that allows them to comfortably upgrade their ATM fleet beginning now. Not only will manufacturers be backed up if IADs wait to begin their upgrade processes, but service companies will also be backed up trying to service the upgrade requests."
But the waiting game persists as each constituency waits for the other guy to make the first move. Even off-premise ATM manufacturers do not want to bet on the wrong variety of EMV and are waiting for bank ATM manufacturers to show the way.
Triton's Phillips compared the current state of EMV deployment in the ATM space to the dilemma faced by manufacturers of video cassettes back in the 1970's, when Betamax and VHS were the two competing formats. With the value of hindsight, Betamax developers bet on the wrong format. "We don't want to support Betamax when VHS will be the winner," Phillips said.
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