As Canada ramps up its EMV migration, pressure on the U.S. intensifies

Many experts suggest that card fraud will migrate to the States, because the mag-stripe is more vulnerable than the chip.   But the migration to EMV is expensive and time-consuming, and the technology has yet to prove itself, say some U.S. security experts. Besides, until ATM and debit fraud reaches an unmanageable level, U.S. FIs don't have a great deal of incentive to make the shift. Coupled with that perceived lack of fraud is the fact that EMV/chip technology also has not lived up to its full potential, where the storing of additional information such as biometric or additional account details is concerned. Some experts in Canada, such as Wendy Macpherson of Interac, Canada's payments association, say U.S. FIs may have bigger worries than they think. "I think that one reason the U.S. has not moved to EMV is that the financial institutions there might not have a good handle on exactly how much fraud there is," she said. "Because the country has so many small FIs, and so many FIs overall, it's hard to really have a handle on what's going on everywhere." Canada, unlike the United States, has a single paymets body, Interac — and being the only game in town has its advantages, says Allan Conquer of NCR Canada and a resident expert on chip and PIN technology. "Interac has played a central role in the payments space in Canada for 25 years, and there has been a strong push for them to take an independent position," Conquer said. "Their rules are well established and they try to stay at the forefront of all security compliance issues." Will the U.S. benefit from waiting on EMV?In 2005, Interac made the decision to move from mag-stripe to chip and PIN, after migrating fraud trends suggested vulnerabilities in Canada's payments infrastructure. Because the conversion process is a laborious one — evidenced by the time-consuming and trial-and-error process the United Kingdom underwent for more than a decade on its quest to convert to EMV — Macpherson says Interac knew it would take several years to reach the summit. Interac's goal is to have all bank-owned ATMs in Canada converted by 2012. For POS devices, the deadline is 2015. "In Canada, we have strong national banks and a well-defined mid tier of financial institutions," Conquer said. "When we look at the U.S. model, while there has been a strong consolidation effort over the last decade, there still remain a lot of regional players out there. You don't have a coast-to-coast payments entity like Interac."  Conquer suggests U.S. FIs will bypass the chip and go directly to a post-field communication model, such as contactless. "I think all of that has yet to be determined," he said. One good thing, he said, is that the United States is working with American Express, Visa and MasterCard — all of which have been through EMV migrations in other countries. The U.S., by waiting, can learn from their experience in other markets. That experience, coupled with the global market knowledge of the ATM manufacturers and many larger U.S. FIs, will likely benefit an EMV-like conversion in the States, when it comes. NCR Corp., which holds a leading position in Canada's ATM market, was able to leverage its global expertise when working with Canadian deployers on their EMV conversions, Conquer says. "Because we have a presence in other countries where EMV has taken off already, like the U.K., it helped us in Canada," he said. "So you can tap into those Visa and MasterCard standards around world." ATM manufacturers jump aboard Many ATM players are already in the EMV game. NCR, Diebold Inc., Wincor Nixdorf International and GRG Banking Equipment Co. Ltd. have all deployed EMV-compliant ATMs and upgrades in markets outside the United States. Leveraging that international experience is expected to help progress with U.S. FIs. And now some of the industry's dominant off-premises players, such as Nautilus Hyosung and Triton Systems of Delaware have gotten into the act. During the ATMIA Canada conference last month, Nautilus and Triton announced the availability of EMV upgrades for some existing ATM models. Newer models come equipped with EMV compatibility. Some models can be upgraded; other ATM models will have to be replaced. But the manufacturers and the industry are adapting, and they're adapting at faster rate with each new market that EMV hits, NCR's Conquer says. "ATMs have an operating life of anywhere from 15 to 20 years. So there is a wide range of equipment out there," he said. "For the newer models, those that are five years old and younger, many of the EMV changes were anticipated at purchase, so only software upgrades will be necessary."