EMV is on its way. Is your credit union going to welcome it in, or leave it standing on the doorstep?
In August 2011 Visa announced its plans to drive chip card adoption in the U.S., putting EMV implementation into motion in one of the last countries still using magstripe cards. Since then, MasterCard and Discover have also released frameworks for an EMV rollout.
These roadmaps provide deadlines over the next two to three years for U.S. financial institutions and merchants to become compliant. Several large credit unions have proactively begun offering EMV card products to their member bases.
So how are you approaching EMV implementation? Is it being viewed as a nuisance, or an opportunity to take advantage of the program's benefits and integrate value-added products into your overall payment portfolio?
It is no secret that the most powerful benefit of an EMV infrastructure is fraud reduction. EMV cards are less prone to fraud than their magstripe counterparts because of the two-layer authentication process that confirms the card and user. While most of the world has already made the move and experienced significant reductions in fraud rates, the U.S. remains a holdout.
An Easy Target
This makes our financial institutions and merchants low hanging fruit to fraudsters. And while the U.S. and other markets rely on magstripe technology, worldwide card-present fraud won't be eliminated because EMV-compliant countries still issue EMV cards with magnetic stripes to ensure international compatibility. The ease and profitability of skimming and duplicating magstripe cards will continue to attract fraudsters and plague institutions and merchants.
A significant reduction in fraud is far from the only benefit of proactively implementing EMV. Improved member service will also result as members will have fewer inconveniences when travelling abroad. Aite Group estimates that 9.7 million U.S. travelers have experienced issues abroad in using magstripe cards.
By providing its members with EMV-enabled cards, you gain a significant competitive edge over those waiting until the final deadline to implement EMV.
The chip will also enable CUs to expand functionality of payment cards because it offers significantly more memory capacity than the magstripe. This opens cards up to non-payment functions such as loyalty programs, contactless payments and other member services. Credit unions can use these tools to offset the costs of upgrading to EMV, while facilitating a better member experience.
Credit unions should consider EMV's role in their organization's long-term payment strategy along with these member benefits when deciding at what point to implement EMV. While EMV is proven to drastically reduce fraud rates, fraud is like a game of Whac-a-Mole and where you knock down one mole, another appears a few inches away. It is for this reason that EMV should not be used as a standalone solution, but should be viewed as part of a comprehensive, cohesive fraud prevention strategy spanning brick and mortar as well as card-not-present environments.
While many institutions view EMV implementation as a costly complication, there are options available that will allow credit unions to take advantage of the benefits without a complete infrastructure overhaul. In fact, a phased approach to the process will ensure an easier, more cost-effective switch.
Taking this approach allows your selected EMV technology to work together with the existing magstripe card management system to ensure the implementation requires either minimal changes to the existing system, or in certain scenarios, none at all. The legacy magstripe system can continue to manage card issuance while your EMV solution enables the EMV component in areas such as online transaction processing, data preparation, profile management and clearing data handling. Implementation takes far less time, costs less and causes fewer interruptions, because there is no need to migrate the card and member base already in place.
Time To Get Proactive
The question is no longer if, but when all U.S. issuers and acquirers will be required to be EMV compliant. Credit unions should take this opportunity to be proactive and invite EMV into their organizations in order to take advantage of a slew of operational, competitive and member benefits.
Maria Nottingham chief marketing officer with Compass Plus, Weston, Fla. For info: www.compassplus.com.