In the months leading up to the much ballyhooed Oct. 1, 2015, EMV (Europay, MasterCard, Visa) liability shift, the industry buzz around the technology divided experts into two groups: those who believed EMV would solve most, if not all, of the fraud issues in the U.S. and those who believed it would have little to no impact.
Now, four months after the shift, we can finally settle this heated debate, right? Not exactly.
The pace to migrate has been more like a power walk than a sprint. The slow migration to EMV makes it nearly impossible to declare any winners or losers.
While we wait to find out, the card-present plastic card losses continue to mount.
Why is it taking so long?
According to a survey by ConsumerWorld.org, less than 21% of 48 national retailers surveyed have implemented the technology. Retailers aren’t the only ones to blame as credit union adoption, especially on debit cards, seems to be following the same snail’s pace.
From a retailer’s perspective, the incentive wasn’t strong enough to make the switch and potentially slow down holiday shoppers with increased checkout times.
It was a risk they were willing to accept, even in the face of potential chargebacks, and was reinforced by how many financial institutions had not yet implemented EMV either.
On the credit union side, cost, prioritization of other major projects and in some cases delays seem to be the common reasons shared.
Remember, EMV cards can still be used in a magstripe environment. That means data can still be stolen through data breaches, skimmers, and other methods.
The power of EMV isn’t in preventing those incidents but in the ability to authenticate the card is not counterfeit.
We will likely continue to see fraud on EMV cards if the data is compromised and then used online or at a retailer that doesn’t have a working EMV point-of-sale terminal.
The big win for credit unions is that in the event magstripe information from an EMV card is counterfeited and used at a retailer without a working EMV point-of-sale terminal, the credit union now has the ability to chargeback the retailer.
One credit union reported charging $82,000 back to retailers over two months since implementing EMV.
Keep in mind, there will still be a reissue cost and an additional cost for credit unions relying on processors to fulfill the chargeback process. But this is still better than covering the fraud costs, too.
In 2016, liability shifts for ATMs will occur for MasterCard, and in 2017, both card networks will shift liability for gas station pumps.
Until then, these areas will continue to be weaknesses, so exploring an early ATM transition and increasing fraud controls at gas stations are good options to consider.
If your credit union is feeling the brunt of card-present fraud, at the very least consider the return on investment EMV might have and give it a fair shake at working for your credit union.
ROBERT T. JAROSINSKI is a senior risk management consultant for CUNA Mutual Group. CUNA Mutual Group policyholders are encouraged to visit the company’s Credit Union Protection Resource Center for a wide array of helpful online resources, including training modules, regular releases of risks, and loss control recommendations. For registration information, contact CUNA Mutual Group at firstname.lastname@example.org.