Article

EMV: Can we afford to wait?

The key is to make the best-informed decision possible.

September 26, 2013

Mark D. Smith
VP of financial services, Kahuna ATM Solutions

During a recent presentation on EMV at a financial services conference, audience members asked questions about the cost of upgrades to existing ATMs.

The answers always start with the cost of the card readers, the cost of labor for field installations, and the pending costs to update the readers with software to enable EMV transactions. Roughly $2,000 to $4,000 per ATM is anticipated when all the services are added up.

Then, the deal-breaker: Someone asked how much it would cost to issue new cards. Close to $4.00 each; whereas they cost approximately $1 today, was the answer.

If someone were to wait until the eleventh hour to make provisions for EMV upgrades, they might find themselves financially strapped and vastly under-budgeted.

Planning and preparation have to be considered and we recommend that you do not wait any longer to outline your action plan. You must plan properly or the cost may overwhelm you. So, can you afford to wait?

If you deploy ATMs, it is most important that you keep up with the latest developments in order to make the most informed decisions possible:

Prepare.

Talk to hardware manufacturers, transaction processors and service teams to determine what you need to do with your fleet of ATMs.

You should know that service companies won’t be hiring thousands of techs to do this work when the time comes, and manufacturers can only make so many upgrade kits per day once the demand escalates.

Remember, there are over 400,000 ATMs. The greater majority will need some type of attention.

Here are estimates for EMV conversion in just the retail sector:

45 percent will need to be upgraded;

50 percent will have to be replaced; and

5 percent will be retired.

You don’t have to rush out and buy EMV card readers right this second, but you would be well-advised to put an action plan in place.

Evaluate your existing terminals and decide which to upgrade first, how many to replace, and whether you even want to continue operating at that location.

When you buy new ATMs, get the EMV upgrade option. It will save field installation fees down the road, and will help spread conversion costs over a longer timespan.

Educate.

 Use this time to talk to cardholders and discuss the differences in cards being issued. Cards will have both mag stripes and a chip for quite a while but, at a minimum, customers need to be informed about how the new card readers will work.

We’ve done a great job teaching people to insert their card in the reader and remove it quickly. Unfortunately, that’s not how an EMV reader works: It will hold the card in order to enable continuous contact with the chip.

Cardholders will instinctively try to pull the card back out. But this will nullify the transaction (and could also damage the reader).

Take this time to develop an EMV information program that includes several weeks of customer focus and attention. Consumers will need to be taught and they’ll appreciate your guidance.

Here are some effective consumer education methods:

• direct mail;
• email blasts;
• physical signage;
• on-screen messaging; and
• in-store/branch outreach.

And remember — you’re not only teaching customers how to use your ATMs, but you’re also teaching them how to use EMV POS devices and fuel pumps. 

Act.

 ATM manufacturers offer EMV card readers as an option today at a cost of approximately $250 to $300 for the upgrade. EMV might not be used on that ATM for some time, but you’ve at least prepared for the technology and cut down on multiple visits to the terminal later for upgrades. Labor is costly.

You might also wish to begin stocking an inventory of card readers for your fleet of ATMs. If possible, have your technicians begin replacing card readers on existing terminals when they perform other maintenance.

This will make their time in the field more efficient and allow you to update your fleet gradually and thus avoid taking a huge financial hit all at once. 

Don't sweat it.

You should expect a bit of user error in the first few years of EMV. As hard as we might try, we won’t be able to reach everyone. Inevitably, the card readers will have to endure a good deal of wear and tear, so keep spares on hand!

If you plan to re-issue cards, it may be advisable to begin adding the chip you’ll ultimately need for EMV security at this time.

In Canada, card issuers took advantage of the few years they had to prepare and they began to provide their customers with EMV-ready cards ahead deadlines.

The cost of card production was spread out more efficiently. By the time EMV went live, the majority of the card holders the right plastic, and they knew how to use it.

The good news is that we know EMV works and that it is a highly effective means to significantly reduce card skimming and fraud. We also know the costs from global experiences that have been shared with the U.S.

The message is clear; unless you have stockpiles of money laying around, waiting until the last minute to act on EMV could wreak havoc on your budget. Prepare well in advance, educate everyone who uses a credit/debit card and make EMV a priority when you plan your budget.

Read more about EMV.

photo: kojotomoto