As a credit union decision-maker, you are well aware that EMV technology is emerging as the new security standard for card-present payments here in the U.S., and that EMV adoption is moving forward much faster for credit than for debit.

While the conversion to EMV technology brings with it increased fraud protection for consumers, your credit union may be struggling with the uncertainties of these uncharted waters, especially on the debit side of the equation.

“EMV for credit is moving into the U.S. marketplace now, so credit unions have some visibility into how this technology will impact their business,” said Michelle Thornton, director of product development for CO-OP Financial Services. “EMV for debit is another story. Because the technology required to meet U.S. regulations is still in the development and implementation phase, the industry is diligently working to deploy this in the market.”

Durbin, Debit and the Common AID

According to Thornton, the nationwide move to EMV for debit was complicated by the passage of the Durbin Amendment to the Dodd-Frank Act of 2010, which required debit cards issued in the U.S. to support routing to two unaffiliated networks.

“The technology was developed to process EMV transactions exclusively by a single proprietary network,” she said. “To bridge the gap between what EMV technology was designed to do – and what it must do here in the U.S. – a new solution emerged which requires software changes to the vast array of legacy systems in place at U.S. merchants, processors and issuers. While strides are made each day to move the payment industry from here to there, there are still unanswered questions as to how EMV for debit will ultimately work for consumers, merchants and financial institutions – at least in the next few years while the U.S. is implementing EMV.”

The debit solution for the U.S. required Visa and MasterCard to make their respective Common AID (Application Identifier) available to other networks. That free, perpetual license of their EMV AID opened up EMV technology to any non-proprietary networks who license the technology.

“At CO-OP, we are offering our client credit unions a subsidy to help them implement EMV technology on their cards,” Thornton said. “But while the most immediate terminal implementation challenges are tasked for merchants, once EMV debit cards make their way into the hands of U.S. consumers, financial institutions everywhere will need to ensure that their ATMs are also EMV-enabled.”

Time for an ATM Upgrade

Thornton suggested that credit unions start now by identifying which ATMs in their fleets require updates to software and hardware, including the addition of EMV card readers.

“Code has been developed on ATMs to support the Common AID,” she said. “ATMs will have to recognize the presence of the Common AID on a card and then override standard EMV priority selection of AIDs. This is how the Common AID will become the default, enabling routing to networks of the ATM owner's choice versus being forced to only the global card networks.”

And once EMV for debit is here, Thornton advised all to expect the unexpected.

“The consumer experience with EMV for debit may vary from merchant to merchant and terminal to terminal, especially in the early stages of deployment, because so much of the software involved is highly customized for the merchant at hand,” she said.

Thornton noted that while EMV adoption presents significant changes across the industry, it is an important step forward for the U.S. in today's global economy. “Overseas merchants generally accept magnetic stripe cards today, but there will come a time when these cards are obsolete outside the U.S.,” she said. “Remember also that EMV is just one of many new fraud tools and emerging payment technologies. New mobile options are popping up everywhere, each with its own complexities.”

She continued, “The payment industry is quickly advancing. Credit unions that embrace this 'new normal' will thrive in the future and deliver lasting value to members.”

For more information on how to move forward with EMV for debit, download CO-OP's new white paper, “Common AID & EMV for Debit: What You Need to Know,” here.

Instant Insights /

EMV for Debit: On the Payments Horizon

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