Friday, February 27, 2015
While generally receptive to implementing EMV, independent ATM deployers (IADs) who attended the ATMIA conference expressed growing frustration with “shrinking” interchange pricing that has negatively affected their bottom lines. George Sarantopoulos, Director of Marketing at Brooklyn-based Access One ATM Inc., even described the relationship between card brands and IADs as dysfunctional.
"The card brands are asking [IADs] to invest even more in our ATMs while they want to pay us less," he said. "The IADs have built up this incredible network of ATMs throughout the country where everybody has easy access to cash 24/7/365. And now that the job is done and the card brands no longer need us, we’re being subjected to a double threat of decreasing interchange margins and increased costs if we don't upgrade to EMV." He predicted current economic trends could push many IADs out of the ATM industry unless they can organize as an industry and innovate their way “out of this quandary.”
Providing a different perspective, MasterCard Worldwide Group Head Leland S. Englebardt, who spoke at the conference, said he expects EMV deployment by the U.S. ATM channel to dramatically reduce counterfeit fraud rates. Englebardt leads MasterCard’s global switching platforms for credit, debit, and prepaid products, which account for 34 billion transactions annually in 150 currencies and 210 countries and territories that use MasterCard, Maestro and Cirrus-branded cards.
On Jan. 15, 2015, Kahuna ATM Solutions stated in a blog post that the “number one, single largest legislative-regulatory item that poses a threat to IADs is the cost to upgrade terminals to EMV, according to the 2015 US IAD Survey, co-sponsored by ATMIA and Kahuna ATM Solutions. The number one competitive threat is declining transactions. Other issues that topped the list include shrinking interchange, the implications of EMV liability shifts, ATM saturation, account closures due to Operation Choke Point and ways to increase revenue.”
In all, 109 IADs participated in the ATM channel EMV readiness survey conducted in late 2014. "This survey made it clear that IADs are still unclear on the true impact of the liability shift for ATMs that are not EMV-ready by October 2016," said Bryan Bauer, Kahuna Vice President and General Manager. "We have an enormous task as an industry to figure out exactly what that impact is through real, meaningful data, and then educating IADs on those implications of not upgrading."
Survey results also revealed that only 50 percent of ATM operators expect to be EMV-ready by the October 2016 liability shift deadline set forth for the ATM sector by MasterCard; Visa Inc. set October 2017 as its deadline for the ATM sphere. Following are further highlights from the survey (percentages are rounded off):
According to ATMIA, disparity between IADs and larger financial institutions was evident in certain portions of the survey. Only 49 percent of IADs said they were confident they had the necessary software from processors and other transaction partners to upgrade to EMV, whereas about 80 percent of FIs with more than 1,000 ATMs in deployment expressed confidence they had the requisite tools to become EMV-ready.
"Much of the current discussion surrounding the new 'omnichannel' banking and payment environments is tied very closely to customer experience – giving the customer the ability to seamlessly interact with multiple channels in the process of completing a single transaction," stated Daved Tente, Executive Director at ATMIA USA.
Total System Services Inc. Senior Director of Payment Solutions Sarah Hartman stated in a recent interview with the Smart Card Alliance that factors like global interoperability of EMV-enabled cards, the ability to verify and authenticate EMV-card users, and other applications, such as mass transit and data management capabilities linked to card usage, will drive EMV implementation in the United States and create measurable benefits for IADs and others vested in the technology.
In the meantime, education could prove pivotal for buy-in from all parties. "One of the most critical aspects for a smooth migration to EMV technology is education of the consumer," Tente said. "The consumer experience at an EMV-capable ATM is going to be radically different for most, and there may be some quirky situations that crop up during the transition period."
While working to resolve the near-term challenges of EMV adoption and changing interchange pricing structures, IADs appear to be guardedly optimistic they will be able to build sustainable relationships with card brands that justify their investments in the hardware platforms needed to enhance and protect the consumer self-service experience.
Editor's Note:
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