LAS VEGAS—Credit unions cannot afford to wait on EMV, according to a panel of cards experts.
Despite the implementation date being a full 21 months away, a panel of EMV experts told attendees of Ondine Irvine's School of Credit Card Management Tuesday that card issuers must act now to prepare for the transition from magnetic stripe cards to EMV in October 2015.
Presented by Card Analysis Solutions, the panel consisted of Kent Potterton, VP, card solutions for PSCU, Barney Moore, senior portfolio consultant for CSCU, Michelle Thornton, manager-core products, CO-OP Financial Services, and Michael Reynolds, SVP of sales at Member Access Pacific. Brian Scott, VP, sales for The Members Group, served as moderator.
PSCU's Potterton recommended credit unions begin issuing EMV cards now, at least for members who are international travelers, and noted there is an opportunity for pre-paid EMV cards.
"There is a lengthy certification process involved with Visa and MasterCard, so you had better get started now," Potterton said to CUs. "There is talk of technology, including tokenization, which may leapfrog EMV in 2016 or 2017, but better to start now."
CSCU's Moore said at the very least, now is the time for CUs to start getting educated and certifying all the areas of the credit union that will be involved in the process.
"From starting a program to actually issuing cards it will be a long process," Moore advised. "In the short-term, pre-paid EMV cards are a good option. Each credit union will have to identify segments that demonstrate a need. Get educated now, develop a project plan, have someone take ownership. As long as that October 2015 deadline is out there, take it seriously."
Requirements aside, it's also a matter of staying relevant in the market, added Reynolds, "it is a technology issue and a competitive issue. Credit unions need to have a competitive card."
Scott said approximately 40% of TMG clients will be issuing EMV this year, followed by another 40% in 2015. At PSCU, about 40 credit unions have already issued EMV cards, Potterton noted, while Moore said some 50 credit unions CSCU works with have issued EMV cards. "We have a lot of work to do to plan for the other 2,500 credit unions," he said with a smile.
Cost, of course, is the major drawback to converting to EMV. The panelists estimated the physical plastic will be an additional $2 per card to issue. As for ongoing processing, there will be an extra couple pennies per transaction-raising costs from 6 cents to 8 cents now up to 8 cents to 10 cents.
Will Market Be Ready?
Reynolds suggested Walmart and McDonalds will be ready for EMV thanks to extensive overseas experience, and Potterton said First Data, which handles 50% of merchant processing in the U.S., has been shipping EMV-capable point of sales terminals for at least two years.
But the percentage of merchants who will be ready to accept EMV transactions by October 2015 is likely to be just 10%, Potterton estimated.
"There is a fairly dramatic increase in fraud recently because the United States is an easy target," said Potterton. "Discover and Capital One are seeing 20% to 30% increases in fraud losses. All of this is building to speed deployment, but merchants have been waiting to deploy the hardware so it will be hard for them to catch up by October 2015."
According to Scott of The Members Group, all countries that were in the process of migrating to EMV saw a "huge increase" in fraud before the deadline. "Because the U.S. is the last one, we are a double target," he warned. "I think we can expect fraud to increase the next two years. This is not an outlier, it is a real trend."
But it's not just card issuers and merchants who need to be ready-so do consumers. All of the panelists noted there will be consumer confusion as the transition from magnetic stripe cards to EMV cards takes place. PSCU's Potterton said the need to insert one's EMV card into a slot and leaving it there-as opposed to the traditional swipe of the mag stripe card-will be "education point No. 1" for issuers to inform card users.
Said CO-OP's Thornton, "It will be confusing because merchants will have both tap-and-go terminals and slot terminals."
