The shift to EMV chip-card technology over the next few years could trigger other organizational problems for U.S. banks and merchants.
Some companies in Europe and Canada faced costly setbacks in migrating to chip cards from older magnetic-stripe cards because they underestimated how the transition would affect other core systems, Jean-Christophe Derre, general manager at consulting firm KaSys Canada, said in an interview.
"Many banks in Europe and Canada took all the right steps to certify that their EMV cards worked, but they failed to realize how adding chip cards would affect other aspects of their organizations, and that caused them all kinds of problems," Derre says, declining to name specific types of problems that cropped up or companies that stumbled.
To avoid any surprises, Derre says he urges organizations to involve key personnel from their broader I.T. departments in chip-card plans at the outset.
Many problems stemmed from a decision to assign EMV migration plans to a small team, he says.
"We saw a lot of cases in Canada where marketing people were running the EMV migration, but if they have involved someone from the I.T. department early on, it would have saved them a lot of headaches," Derre says.
Montreal-based KaSys provides software and simulation programs to test EMV cards in a variety of scenarios, so that card networks can readily certify issuers' cards and payment terminals for routine use in ATMs and at the point of sale, Derre says.
The firm's clients include Canadian banks, merchants and ATM operators looking to complete their migration to EMV technology. Though the card networks mandated that Canada adopt EMV last year, many have not yet completed the process, he says.
KaSys now is eyeing the U.S. as its next growth area, as the card networks have set October 2015 as the date when fraud liability will shift, generally to the party using the weakest technology.
While many U.S. card providers are still drawing up their EMV-migration plans, some have already begun. The largest banks last year began
Where banks and merchants may run into unexpected troubles during their EMV card migrations is in integrating ancillary card operations and various proprietary tracking systems with the new chip-card technology, Derre says.
Small and mid-sized banks and merchants are especially vulnerable to overlooking gaps in their broader technology systems when migrating to chip cards, he says.
Banks should also keep in mind that although the world is generally shifting to EMV, companies will be required to sustain legacy systems for several years, he says.
"Some organizations have gotten so caught up in certifying their systems for EMV that they forgot they will need to continue supporting diverse types of cards from all around the world, including mag-stripe cards," Derre says, noting that the full transition to EMV in the U.S. "probably will take several years" beyond the 2015 liability-shift date.
U.S. banks and merchants with operations in Canada or Europe will likely have an advantage in determining how EMV technology affects core systems after learning the hard way, he predicts.
KaSys plans to offer its EMV testing services to U.S. firms from its Montreal offices, Derre says.
"EMV card testing and certification is a competitive niche, but it is fairly specialized and technical so we expect to be busy," he says.
