MasterCard is giving all ATM owners a strong reason to upgrade their machines to accept chip and PIN cards.
Last year, the card firm asked that all ATMs that accept its Maestro international card be made compatible with EMV cards — cards that meet the Europay, MasterCard and Visa (EMV) chip and PIN standard — by 2013. Those that fail to meet this deadline will be more liable for ATM fraud transacted on the cards.
That deadline has not gone away, but this week MasterCard issued a new, tougher deadline: all ATMs that accept any MasterCard cards need to be EMV compliant by 2016.
Beginning in October 2016, ATM owners that haven't upgraded their machines to accept EMV cards will be more liable for any fraud that occurs over their ATMs.
ATM owners will have a choice. They can either upgrade their ATMs to accept EMV payments or face liability for fraud at the ATM for transactions made by an EMV-enabled card at a non-EMV enabled ATM.
"It covers any ATM in the U.S. and falls in line with the liability structure that we already have in place across the globe," says Oliver Manahan, vice president of emerging payments at MasterCard.
The major card networks have all introduced road maps for EMV card migration in the U.S., with varying rolling deadlines for fraud liability shifts.
EMV cards are considered safer than magnetic stripe cards because most EMV cards utilize a personal identification number to authenticate transactions, which makes it harder to commit skimming and other fraud at the point of transaction. Manahan says the latest ATM move is designed to make EMV use universal and international across all channels to optimize fraud protection. "Fraud always migrates to the weakest link in the chain," he says.
In a Sept. 10 blog, Julie Conroy McNelley, a research director for Aite, wrote that it costs about $2,000 to upgrade an ATM to be EMV capable. She wrote that third-party ATM owners in particular will be dismayed by MasterCard's move, given the cost of upgrading a large fleet. "The alternative — accepting the fraud liability and not performing the EMV upgrade — is not particularly appealing either, since there is little the ATM owner can do to mitigate this type of fraud (EMV is one of the only truly effective deterrents to skimming attacks)," McNelley writes.
ATM suppliers should be pleased by the move. NCR (NCR) on Wednesday said it "welcomes" the liability shift and has been shipping EMV compliant motorized card readers in SelfServ ATMs since 2010. Smart Dip Card readers have been compliant since the introduction of SelfServ in 2008. The firm also said for already-installed ATMs, NCR will provide upgrade kits to customers. Diebold (DBD) said it's been manufacturing EMV compliant ATMs since the launch of its Opteva ATMs in 2002.
While estimates vary, there are about 450,000 ATMs in the U.S. MasterCard says four years is an adequate timeframe to outfit ATMs to accept EMV payments. "This isn't a mandate. We're not saying you have to upgrade. We believe EMV is the most secure technology," Manahan says.
EMV technology has proven to be more secure in the markets where it's widely used. The European Central Bank reports reductions in card fraud parallel to the wide introduction of EMV in the European Union. And in an interview for a report on EMV security in the upcoming October issue of Bank Technology News, Zilvanis Bareisis, a senior analyst at Celent, said, "It's unquestionable that chip and PIN (the most common EMV form) cards are more secure than mag stripe…[exploiting EMV security gaps] is not something that's easy to do for the average hacker and fraudster."
Visa didn't offer specifics on an ATM liability-shift road map of its own, but did issue a statement to American Banker saying, "We designed our [EMV] road map with a focus not only on reducing overall fraud in the payment system, but also on supporting emerging payment innovations and enhancing global acceptance, and our goal is to adopt integrated policies and programs that take us in this direction. To that end, Visa will continue to work actively with issuers and ATM acquirers on chip adoption in the ATM environment and encourage the availability of vendor offerings that support EMV contact, as well as contactless and mobile technologies at the ATM."