Over the last year I’ve been getting g a lot of questions regarding EMV. What it is, why there's a need to upgrade again, who should absorb the cost of the EMV upgrades and why are there so many fires in California? The answer is of course, security and the Santa Anita winds.
EMV (Europay, MasterCard and Visa) is an international standard on integrated circuit cards or “chip” cards as well as point of sale (POS) and automated teller machines for authorizing electronically transferred funds (EFT).
Must I Upgrade?
The hard pill to swallow, never mind the fact that we’re still in the wake of ADA, is knowing that there is no choice in the matter when it comes to the EMV migration. Facing the liability shift consequences is the alternative to not complying with EMV, but no ISO or merchant wants to take on the responsibilities that financial institutions are currently fulfilling. In the last eight years the ATM industry has gone through Triple-DES upgrades, ADA upgrades and now EMV. But like most companies in the tech industry, upgrades are required to maintain both resiliency and government compliancy.
The Myth Exists
Canada went through it's EMV transition the first of this year. There was an ISO that had not upgraded a handful of his machines by the January 1st deadline. Once it became common knowldedge the at his machines were not EMV ready a bulls-eye was placed directly over his locations. A group of compromised mag-striped cards were atttained and used on 4 of his machines to withdrawal the equivalent of $90,000. Since the liability had already gone into affect the card issuers were no longer liable for the lost funds, so who paid the $90,000? The ISO who didn't see it worth upgrading his ATMs. IT'S NOT WORTH THE RISK!!
Magnetic Stripe vs. Chip Technology
Currently all cards in the U.S. store data on a magnetic stripe located on the back of every debit, credit and pre-paid cards, a technology that can be routed to the 1960s. Now with EMV, smart-card technology will feature a chip on the front of the card that stores encrypted data to protect against any form of duplication and fraudulent activity. This type of technology will also allow for more contactless “tap n’ go” transactions to follow in later years.
Measurable result driven upgrade = 80% fraud decline
The overall goal of EMV is to reduce the risk of counterfeiting and fraudulent activity while standardizing payment activity throughout the globe. In a study done by the Aite Group, they estimated that 8.6 billion is lost to fraud in the U.S. each year, while the U.S. secret service found that more than $1 billion was directly related to ATMs. Europe has recorded an unprecedented decline in ATM related fraudulent activities mostly attributed to this upgrade.
In regions throughout the world that have adopted EMV, ATM fraud has dropped dramatically, as much as 80%. The facts are solid, EMV is much more secure than the current magnetic strip and the necessity of EMV is imperative to protect people from fraud, and the United States is next in line to suit up and join the international players.
Some EMV benefits
To name a few: A massive reduction in card fraud, ability to use cards anywhere in the world and it takes the industry one stop closer to contactless and mobile payment solutions.
By the end of 2010 close to 1.25 billion EMV “chip and pin” cards were in use worldwide playing a huge part in Europe where half way through 2006 a 62 Million Euros loss was reported due to ATM fraudulent activities, then to 23 Million Euros at the end of 2010, a reduction of 63% in just 4 years!
Yes there are some costs that come with upgrading your terminal, but remember we are in the financial industry, and we deal with customers accounts and livelyhood. So government regulations are coming much more frequent to protect the masses. We are here to provide a service at a standard that we would expect from our providers.