News that another credit union is adopting EMV payment card technology to reduce cardholder hassles when traveling abroad adds ballast to the theory that some U.S. payment sectors won’t wait for a mandate to voluntarily embrace the chip-and-PIN method.
Raleigh, N.C.-based State Employees’ Credit Union next month plans to begin migrating the 1.7 million debit cards in its portfolio to the EMV standard from magnetic stripe-only technology, aiming to complete the process late this year.
The credit union’s smaller credit card portfolio, representing some 300,000 cards, is “next on the list” for conversion to EMV, although no timetable has been set yet, Leanne Phelps, the issuer’s senior vice president for card services, tells PaymentsSource. The goal is for all of the credit union’s cards to eventually have both a magnetic stripe and an EMV chip.
Enabling cardholders to use their cards outside the U.S., where EMV technology is increasingly dominant, is the major reason for the shift, Phelps says. But blocking potential fraud also was a factor.
EMV adds a layer of fraud protection by requiring cardholders to enter a PIN to authenticate the transaction at the point of sale; the cardholder’s PIN data is stored in the microchip.
“We have a lot of customers who travel internationally, and we keep hearing of travelers running into problems using their cards abroad,” Phelps says.
The credit union’s first batch of cards converted to EMV will be its free Cash Points Global Visa debit card, which enables cardholders to make purchases and withdraw cash from ATMs with no debit-overdraft option.
State Employees’ Credit Union customers are required to be North Carolina state employees, teachers, members of the state’s National Guard, or retirees or family members of those groups.
Most of the credit union’s cardholders travel abroad for personal reasons and vacations, but the National Guard members “are deployed all over the world, so an EMV card will be especially useful to them,” Phelps says.
The opportunity to block criminals from skimming card numbers off of mag-stripe cards is another benefit the credit union considered in its decision to switch to EMV, she notes. “We know that the rest of the world is EMV-enabled, and now that Canada and Mexico are going EMV, we worry about what might happen down the road when criminals realize the U.S. is the only place they can conduct certain kinds of fraud using magnetic stripe cards. ... We want to be ready for that,” she says.
Oberthur Technologies is providing the cards and the migration platform, she says. Embedding EMV chips in the cards will cost approximately 70 cents per card, on top of the basic cost of replacing debit cards, which is around $1, according to Phelps.
There is no additional cost to cardholders who receive an EMV-enabled payment card, Phelps says. “We’re not planning a lot of marketing and promotion around it; this is just another benefit for our members.”
North Carolina state employees are not the first to gain the benefits of EMV payment cards. United National Federal Credit Union last year rolled out EMV credit card to its 88,000 members, who travel abroad frequently (
And Travelex Currency Services Inc. last year began issuing chip-and-PIN prepaid cards at its 180 U.S. locations for use in Europe and the United Kingdom (
As pressure builds to block fraud and reduce foreign travelers’ card hassles, and more large merchants announce their capability of accepting EMV transactions through chip-and-PIN-ready terminals, the U.S. market is on the “verge” of EMV adoption, some observers say (
But skeptics say fraud has not yet escalated out of control in the U.S., and the potential price tag of a widespread EMV conversion, estimated at $5 billion to $13 billion, makes a broad movement to EMV unlikely.
Moreover, there is no mandate from the card networks, or any government or industry agency, for merchants and card issuers to invest in EMV, as has occurred in other countries that adopted chip-and-PIN technology.
“We’re bullish on EMV in the U.S., particularly in the fraud-blocking potential it could bring,” Jeff Falk, product development director at The Members Group, a Des Moines-based payment processor with a heavy base of credit-union customers, tells PaymentsSource. “But with economic and regulatory changes in motion that are likely to cut into financial institutions’ bottom lines, it seems less likely that a lot of banks are going to be willing to fork out the extra funds to upgrade all their cards to EMV anytime soon,” he says.
What do you think about this? Send us your feedback.
