EMV Liability Shift Deadline For ATM Operators Is Rapidly Approaching: Here's What You Need To Know

by PDQ Merchant Enterprises
Posted On: 7/6/2016

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TAGS: PDQ Merchant Enterprises Inc., EMV chip cards, EMV adoption, ATM owner's EMV liability, MasterCard chargebacks, Visa, EMV deadline, ATM fraud, ATM theft, ATM skimming, Phil Webb


Sponsor: PDQ Merchant Enterprises Inc.

With an estimated 70% of U.S. consumers currently carrying EMV chip cards, the United States is transitioning away from magnetic stripe payment processing protocol and replacing it with the chip technology.

While adoption of EMV has already occurred virtually all over the world, the implementation of EMV-enabled cards domestically is still underway. In the retail point-of-sale space, the shift is gaining a foothold, as shoppers are finding greater acceptance at a growing number of stores. By comparison, the move to EMV at ATMs is just getting ramped up.

However, the conversion of ATMs that can accept EMV cards is expected to rapidly accelerate largely as a result of a rapidly approaching deadline that holds major consequences for ATM owners/operators: On Oct. 1, 2016, the liability for chargeback or fraudulent disputes on ATM transactions using a MasterCard-branded card will shift from the bank or card issuer to the ATM owner. Visa's liability shift will occur one year later, in October 2017.

What this means is that, after Oct. 1, if or when an ATM customer with an EMV-enabled MasterCard card completes a transaction at an ATM machine not equipped to accept EMV processing, the ATM owner is liable for any disputes. However, if the same ATM patron uses their EMV card at an ATM machine that is EMV-enabled, the liability remains with the bank or card issuer. Likewise, if the customer doesn't have an EMV-chip card to use for the ATM transaction, the liability also stays with the bank/card issuer.

What is EMV and what is driving the conversion away from magnetic stripe technology?

EMV is the international protocol for processing chip cards, originally named after the three organizations (Europay, MasterCard and Visa) that developed the specifications. Increased security of the EMV has been the primary rationale for this sweeping change from swipe (dip) versus clamping (EMV) type transactions.

Why is this such a big issue? Fraud is on the rise. According to the analytics software company FICO, the incidence of ATM skimming -- whereby a card reader, disguised as part of the machine, is installed -- increased a whopping 174% the first four months of 2015, compared with the same period the previous year. These readers save the users' card numbers and PINs, which are reproduced into fraudulent versions typically used for illegal, unauthorized purchases. Some peg industry losses due to ATM skimming at $2 billion annually.

As noted, EMV cards provide a much higher level of security for transactions, greatly reducing lost, stolen or card-not-present transaction issues. And, the chip technology virtually eliminates counterfeit card fraud.

For owners/operators of ATMs, now is the time to migrate to EMV. And if the "liability shift" issue isn't enough of a motivator, the fact that consumer concerns about identity theft and personal data security has never been greater should serve as a call to action for making ATM machines EMV compliant.

"Operators and ATM owners should start with an EMV analysis of their ATM equipment," said Phil Webb, president of PDQ Merchant Enterprises, an ATM ISO, reseller and operator. "Some may already be EMV-ready, while others will need to be retrofitted or possibly replaced. Use your ATM provider as a resource during the EMV migration process," he said.

Another key for ATM owners/operators to know their application identifiers (AIDs). These are the identifying codes that allow that ATM machine to interact with the EMV card chip and to designate which network is associated with the card being used for any given transaction.

Again, Webb suggested that operators work with their ATM suppliers to navigate through the inevitable questions about requirements, technical specifications, costs and timetables.

"ATMs have been a key staple for operators for the past several years," Webb said. "To protect and enhance this revenue generator, moving forward with an EMV technology implementation should be a priority, especially with the liability shift deadline coming up."

ABOUT: PDQ Merchant Enterprises Inc. (Johnsburg, IL) specializes in automated teller machines, both as an operator of the devices and as an independent sales organization (ISO) that serves as an agent for ATM merchants and owners. PDQ was founded by Philip Webb, who has been involved in amusement machine operations for more than 20 years. He has been operating ATMs since 1999. For more information about PDQ Merchant Enterprises, ATM equipment or supporting services, contact Joe Bundra at (815) 331-8082 or JoeBundra@pdqmei.com.

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