RANCHO-CUCAMONGA, Calif.-The U.S. migration to EMV is not a mandate, but it might as well be, says one compliance expert, who is also providing some guidance on making the shift to this new payments technology.
From the perspective of Kim Hester, EVP of financial solutions at CO-OP Financial Solutions, EMV is such a major payments system change-one which will significantly reduce fraud expense-that credit unions should look at it much like they do rules handed down by the CFPB.
The risks are simply too great when not making the shift, noted Hester. She said CUs standing pat lose out on a much more secure chip-based payments method that will make the CU's mag-stripe card a bigger fraud target once the majority of U.S. plastic converts to EMV. "Plus, you have to keep up with all the banking brethren who your members may take their business to since you don't have a more secure payment offering. There really is no option."
October 2015 is when Visa and MasterCard shift fraud liability to the least secure entity. That means if the credit union has its mag-stripe plastic swiped on an EMV-enabled terminal after October 2015, the CU accepts the fraud liability, not the merchant.
Recognizing the importance of making the move, Hester also addressed migrating the CU's cards to EMV at the right time. "There still is a lot to be figured out. We spend a lot of time educating our clients on EMV because the migration needs to be done right. You can't launch into something before all the payments infrastructure decisions have been made."
Infrastructure Not There...Yet
While merchants are bringing on EMV-capable payments terminals, the POS infrastructure has yet to reach a critical mass for EMV acceptance. There is debate over the standard EMV form-chip and PIN or chip and signature-and over whether there will be a common U.S. debit application identification (AID). By having a common AID used in debit routing, multiple payments networks can participate on a debit card, not only providing the issuer with greater flexibility, but complying with the Durbin rules that state debit cards must have two unaffiliated networks on their card. If there is not a common AID, EMV transactions can be routed only through the one proprietary network on the card.
"Needless to say, this matter must get figured out," said Hester. "You don't want to launch an EMV card before all the infrastructure decisions are made. It is just very costly-as we know-to reissue EMV. The credit union may want to issue EMV first with credit cards. That could be the best way to go."
According to Hester, CUs must gain a great deal of understanding about their members' and the CUs' card needs and then decide the best time and way to pull the trigger on EMV.
"We just hope credit unions don't get pushed into something until everything is ready. Take time to gather information, all the data points, prepare operational policies and procedures and plan the EMV roadmap carefully. Maybe go with a phased approach. Do anything else and it could turn out to be costly-implementation costs are hardware, software and certification expenses. It adds up quickly."
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