With the move to the Europay/MasterCard/Visa (EMV) standard underway in the United States, news comes from payment technology firm NCR Corp. that the first EMV-compliant ATMs have been deployed. People's United Bank, which operates over 400 branches on the East Coast, went live with a handful of EMV ATMs at its branch on Park Avenue in New York City in late May 2013.
NCR said the People's United ATMs included an upgrade to the card reader hardware inside the machines, as well as a software upgrade. The ATMs are only EMV-compliant for MasterCard Worldwide-branded payment cards processed over the card brand's European Maestro debit card network. So it is likely that the only EMV-enabled cards to be used at the ATMs will come from foreign travelers to the United States.
U.S. acquirer Vantiv LLC is Peoples Bank's card processor. Chuck Gidaro, Vice President for ATM Channel Management at Vantiv, said Peoples United had terminals that were "almost ready to go with EMV." The ATMs were brand-new and state-of-the-art, and "just needed a little bit of a software upgrade," Gidaro added. "So we worked with them to get those ATMs in production."
NCR, which was heavily involved in transitioning the payments infrastructure in Europe to the EMV standard in the late 1990s, said that 36 percent of bankcards and 65 percent of terminals operate with EMV globally.
The company noted that France was the first country to implement EMV and has seen an 80 percent reduction in fraud since. EMV is considered more secure than mag stripe technology because EMV-based chip and PIN cards are harder for fraudsters to counterfeit.
But the road to EMV for the United States may be bumpy. Steve Osborne, Managing Partner at NCR Consulting, North America, called the U.S. market the most complicated one to transition to EMV.
Unlike in other countries, such as Canada, where Interac largely controls the payments system and can dictate deadlines to issuing banks and processors, no such central authority exists in the United States, Osborne said. Additionally, the simple fact that there are a large number of card issuers in the United States in comparison to other countries makes the EMV transition all the more difficult, Osborne noted.
The EMV migration rests on the decisions that card issuing banks and credit unions make, which are challenging and many. Osborne said, "It's a big, complicated exercise to set up all of your host and authorization infrastructures, your card management infrastructures, your customer help desk infrastructure, as well as your point of sale and ATM infrastructure itself, just in terms of the overall project.
"It's probably one of the biggest undertakings a financial institution would take with their physical infrastructure." Osborne compared those decisions to how an individual chooses a personal computer, figuring out how much memory is needed, depending on what tasks the computer will be used for. "The financial institutions have to make some decisions around what type of chip do they want," he said.
"Do they want to have a contact chip, a contactless chip, or a combo chip? They have to make decisions around how much memory do they want on the chip, depending on what types of applications would they like to have in the future, apart from just credit or debit."
But that's not all. Bilateral agreements must be formalized; project planning templates must be in place; and consultants experienced in other EMV implementations around the world must be brought on board to render guidance to U.S. financial institutions, Osborne added.
The good news is that the U.S. market can take advantage of that worldwide experience. "EMV has really saved the most complicated market for last, so they can have the maximum benefit from lessons learned from other implementations," Osborne said.
Gidaro said Vantiv has taken a leadership role in the EMV migration effort in the United States. The acquirer has a large stable of ISOs working for it, and Gidaro has advice for ISOs that operate ATM networks.
"Everyone needs to do an assessment of their current platform," he said. "If I were an ATM owner, the first thing I would want to do is assess the number and types of transactions that I see. How many are international, and how many are domestic?"
Operators should also assess their fraud risk, determine if EMV is a necessary expense and if noncompliance is worth the risk. Gidaro offered the following scenario: "If a consumer presents an EMV-capable card, and that ATM cannot accept that EMV transaction, and then fraud occurs as part of that transaction, and if it turns out to be a fraudulent transaction - according to the EMV rules - the card issuer is not responsible for that fraud. The ATM acquirer becomes responsible."
Gidaro sees three options available to operators: upgrade ATMs, don't upgrade ATMs and shoulder the risk, or simply turn the ATMs off. The third option comes into play when ATMs are either low-volume or are situated in high-risk locations. "Obviously turning off machines may not help the industry," he said. "But that's definitely part of the consideration."
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