Having slogged through a migration to chip cards over the past few years, Canada's financial service providers know their way around EMV.
This was apparent in the workshop, "What you need to know about EMV," at the 2012 ATM, Debit & Prepaid Forum in Phoenix, where a quartet of Canadian experts fielded wide-ranging questions about the technology and its real-world application.
It was also apparent in the workshop that, when it came to the question of how to implement EMV in the United States in an orderly, coordinated way, Canadians are just as stumped as Americans.
Liability and leverage at the ATM
The workshop was moderated by Catherine Johnston, CEO of ACT Canada. Panelists included Michel Chalifoux, vice president of business development at Multos International; Nigel Codrington, CEO at FICS Consulting; and Oliver Manahan, vice president of emerging payments at MasterCard Worldwide.
One of the tougher questions for the four came from an audience member who asked about liability at the ATM. As the liability shift works now, an EMV-compliant acquirer would still be responsible for a fraudulent transaction committed using a magnetic stripe card at a non-compliant ATM. The liability always rests with the acquirer, Manahan said.
The next question: Then how can an acquirer get a non-compliant ATM operator to upgrade to EMV when the operator has no liability?
In Canada, Chalifoux said, the banks were the key to solving this problem. "[They] went to the white label ATMs and said … We're going to stop accepting these transactions. We're not going to let them happen. It didn't take long after that. We saw a large movement with people starting to invest. It was a large investment for these ATM networks, but they were becoming the weak point and you have to adjust."
What to do about Durbin?
Another workshop participant wanted to know how a card issuer could design and issue chip cards "when the whole PIN debit routing and Durbin mandate isn't solved yet?"
Johnston said that at least two groups were currently working on the problem: "What we hear from other parties who have the same problem that you have is that they are proceeding to move ahead … [e]veryone's moving to that date [the April 2013 liability shift] because the fear is, of course, that your competitor will release something.
"But I believe that before that happens, the solution to this problem will be identified, it will meet the business requirements of all the various stakeholder groups and then it will be a matter of determining how long will it take to enact that solution."
"I think they have to delay the liability shift until that's solved," the audience member said.
Manahan acknowledged that the card associations had announced the liability shift deadlines with the expectation that the issue would have been resolved much sooner. "And I think a bit of the issue is that there are probably 14 different pin/debit networks in the U.S. and varying stages of knowledge around EMV," he said. "Some of them are absolutely on mark with what the issue is, and other ones are still figuring out the acronyms."
The trouble with timing
As financial industry members approach EMV, they will need to be "much more involved with a whole lot more people," Chalifoux said. Timing, whether for certification, testing or basics like spending on terminals when banks haven't even issued cards is critical, he said.
"The level of communication between the different players is very important," Chalifoux said. "And that's why you have all of these groups now popping up about trying to get people together to discuss the situation. It makes a huge difference if you're able to get people around the table and discuss all of this."
Chalifoux acknowledged that the business case for migration is difficult, given that the payback could be as long as 10 years. At the time of Canada's transition to EMV, he was working at a bank and most of the other business cases he was dealing with had paybacks of 18 to 24 months, he said. "So you begin asking very difficult questions from that perspective."
But, by the same token, banks that didn't make the switch were falling victim to increased levels of fraud, a situation that was not acceptable to his bank's board of directors. When the bank migrated to EMV, the bank's proportion of fraudulent transactions dropped from 23 percent to around 12 percent.
Remember, it's more than ROI
Codrington said EMV was becoming more important in terms of money-laundering prevention as well. HSBC in Mexico had seen half of its annual profit vaporized when the bank became caught up in a money laundering scheme by a crime ring.
"So, governments and large institutions have taken a very different attitude now to what is an acceptable level of fraud loss," he said. "Before, it was a few percentage points; it was cheaper to live with fraud. That's no longer the case, because that fraud is helping to finance terrorism."
Apart from that, though, Codrington said EMV is also the platform for enabling "better and better advanced payments, especially as the mobile world opens up. And it presents opportunities to reengineer your business if you're bold enough to take that opportunity. So EMV is a huge opportunity as well as a cost in terms of improving your competitiveness."
ACT Canada offers a website where U.S. financial services industry members can go for EMV answers and support. To log on, go to www.emv-usa.com, then enter the user name 1022subscriber and the password actemv1022.
For more on this topic, visit the EMV research center.