Early stage adoption of EMV technology in the U.S. is being planned in phases between now and 2017 with a significant part of the migration starting in 2015. For credit unions, the best strategy at this juncture is to be fully aware of the plusses and minuses of EMV technology and be ready when management – and the market – are ready.
The time to begin formulating an EMV launch plan is now and we believe the best place to start is on the credit side of the EMV standard. That’s because the uncertainty swirling around EMV deployment on debit cards does not extend to credit due to several factors. For those credit unions with credit portfolios, starting the EMV migration with credit cards is the prudent way to embark.
One of the main reasons credit makes more sense is because of critical issues associated with the Durbin Amendment and looming questions about how it will impact EMV debit card transactions going forward. Although EMV applications are debit/credit agnostic, regulations and network implications that affect debit are not.
Here are some of the key reasons why credit, particularly in light of Durbin, is the place to start for EMV implementation:
- For EMV debit transactions, Durbin requires two unaffiliated networks (e.g. PIN and signature) and merchant routing control. This is not required with credit.
- EMV transactions must route only to the proprietary network that owns the application, circumventing merchant routing control and network choice. Not required with credit.
- Competitive debit market in U.S. with 18 debit networks creates a highly complex transaction environment. Credit cards, however, are not affected.
- International travelers often carry credit as their card of choice when traveling.
The bottom line is that implementing a credit-based EMV program as a starting point will be less complicated and thus easier than a debit-based program to successfully launch.
Even so, CO-OP Financial Services earlier this year certified with Visa utilizing a debit-based EMV card. The card functioned successfully for members and staff of Bank-Fund Staff FCU, Washington, D.C., in at least six European countries.
Europe along with most of the world except the U.S., are already on full EMV functionality and have been for many years. Today, 97% of European ATMs are EMV compliant, as are 80 nations worldwide.
Other credit unions that have launched EMV programs in some form include at least the following: ORNL Federal Credit Union, Oak Ridge, Tenn.; Alliant Credit Union, Chicago, Ill.; Financial Partners Credit Union, Downey, Calif.; Andrews Federal Credit Union, Suitland, Md.; State Employees’ Credit Union, Raleigh, N.C.; State Department Federal Credit Union, Alexandria, Va., and United Nations Federal Credit Union, Long Island City, N.Y.
Consider All Factors
Along with credit versus debit, credit union executives should fully consider all factors when making their EMV decision, including marketing strategy, cardholder acquisition, card-holder retention and collaborative affiliations.
As far as actual implementation goes, the message to credit unions is – don’t be pushed into something for which you are not ready. Once a credit union has made the decision to move ahead, the next step is to determine if its providers are also ready to move forward, which includes assessing personalization vendors, EFT processors and potentially the core processor.
Whether a credit union decides to move ahead with EMV now or wait until management feels they are ready to jump aboard, there are many large and small issues that need to be resolved for the full adoption of EMV technology. The migration to EMV involves the entire payments eco-system.
For instance, the transformation from magnetic strip to computer chip is an enormously complex process with hundreds of moving parts and policies to match. EMV chip card issuers also need to determine whether to use contact or dual interface – i.e., contact and/or contactless – cards. Still to be resolved is the paramount issue of PIN versus Signature.
Continue to keep a close eye on what happens with Durbin Amendment, Regulation II, which requires debit cards to support at least two unaffiliated debit networks. While this issue is challenging, it can be solved with industry collaboration. To this end, the Secure Remote Payments Council, a nonprofit, inter-industry trade association, was established to tackle this problem by forming a consortium of PIN debit networks into a work group to collaborate and find a solution.
On Dec. 10, 2013, the consortium of 10 debit network providers announced the formation of the Debit Network Alliance. This new company will provide a structure for the governance, deployment and implementation of the debit EMV standard.
In the meantime, credit is the place to start with EMV.