EMV: Where things stand now that the shift has occurred

As you know, to combat payment card fraud and encourage the timely implementation of EMV chip cards, card brands set Oct. 1, 2015, as the fraud liability shift date for all magnetic-stripe point-of-sale transactions. While EMV has already been adopted by Europe and much of the world, the United States payment market is larger than all of Europe’s combined. The U.S. is also the most complex card issuing region in the world, with over 16 networks as well as various regulations that govern debit cards.

As a result, it should be no surprise to learn there have been challenges.

The necessary changes ATM and POS vendors and merchants needed to make took time and considerable expense to complete. Once developed, EMV technology needed to be rolled out to thousands of devices – another time consuming undertaking. Overall the credit card transition has gone well.

On the other hand, during the testing phases for debit card processing, there were reports of transaction routing issues, transactions timing out and terminal messaging inconsistencies, causing confusion and frustration among card users.

Put a plan in place

With these issues in mind, understandably some credit unions waited for such challenges to be worked out prior to rolling out their own EMV card program. However as we prepare to enter a new year, it is important for credit unions to have some kind of plan in place for EMV chip-enabled cards.

Credit union service provider LSC® offers some things to consider prior to initiating an EMV strategy for your credit union:

  • Will your issuance strategy be a selective, natural reissue or a mass reissue?
  • Have you considered extending your reissue term to help save on costs?
  • Will you choose a generic card or custom card?

Falling Back

One big thing every credit union should be aware as they implement an EMV strategy is the concept of fallback transactions. A fallback takes place when a chip card can’t be read by a chip enabled terminal (after three attempts) and “falls back” to a magnetic strip transaction. Although credit unions are still liable for fraudulent fallback transactions, most payment networks do not recommend declining them. The reason being you would probably be declining more valid transactions than fraudulent ones.

Keep in mind, in some instances EMV capable terminals were installed but the merchant chose not to enforce inserting chipped cards and the terminal coding was reverted back to a magnetic-strip transaction. In such instances, any fraud liability falls on the merchant, not the card issuer.

It’s important to note, not all types of merchants are currently chip enabled.  Javelin Research is reporting only approximately 25% of merchants are ready for EMV. Some are not required to be. For instance, when it comes to paying at the pump, the liability shift date for Automatic Fuel Dispensers (AFD) chip card terminals is not until October 2017. That means AFD chip card terminals may not be available at gas stations for a while.

Education is still key

Perhaps the most important component when preparing your credit union for EMV, as with most things, is simply education. Making certain not only your staff, but your cardholders have an understanding of how EMV works and what to expect is key to a smooth transition.

Alert your members that EMV chip cards are coming through your newsletter, email blasts, mailings and notices on your website. Include an FAQ sheet of everything the member needs to know about their new card. Utilize and share information offered for by both Visa and MasterCard that give simple, step-by-step instructions. Some card providers like LSC provide free in-branch materials such as table tents and handouts to their credit unions.

Most importantly, make sure your staff can comfortably answer any questions and explain how the cards work and the additional security they offer.

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