Article
For the ATM Industry, no spec, no certainty about EMV
Without a spec from EMVCo, ISOs are left guessing at timelines and costs for EMV chip migration.
May 21, 2012 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications
In the absence of an EMV spec, you get EMV speculation.
Which means that while the major card brands focus on the sector that will be affected most immediately by their published deadlines — i.e., retail — the ATM industry can only wait and guess. In an educated way, but still it's a guess.
"As I've talked to the ISOs, I know that there's some concern on their part — you know, what's going to be done, when it's going done and how it will be supported," said Carlos Siewczynski, USA Payment Systems's newly appointed senior VP of sales and marketing (and previously, vice president of retail sales at Nautilus).
"That's the main question," Siewczynski said. "So they're going back to the networks and they're going back to the manufacturers and they're going back to the processors asking what will be done about it."
At this point, that's impossible to say for certain. Even for some at Visa.
"When it comes to processors, we're focusing much more on the acquirer-processors that drive the point of sale, so if you're talking specifically about ATM processors I don't have a clear picture on that," said Stephanie Ericksen, head of authentication product integration at Visa Inc.
First things first
Even with the best will in the world to do so, ATM industry processors won't know how to move ahead with EMV chip card implementation until they receive a set of specifications blessed by EMV.
"Until there are specs to review, nobody really knows what the impact will be and what will have to be done," said Jerry McCarley, executive vice president and CIO of USA Payments Systems. "The only mandated date at this point is Maestro cards starting in April of next year. This represents 1/10,000 of one percent of our transaction volume."
Until a spec is released, ATM deployers won't know what steps to take to enable their fleets for EMV or how to ensure they'll communicate properly with processor networks.
"That to me is the million-dollar question," said Shaun King, VP of international sales at Triton Systems LLC. "Visa and MasterCard in one sense are just shifting all the liability across and not really telling the ISO how he can mitigate it."
Apples, oranges, carrots and sticks
Insights from past implementations can provide a sort of boilerplate — especially looking at Canada, where implementation is now, at least theoretically 100 percent. King was involved in Canada's migration to EMV and has seen how the spec implementation unfolds.
But there is also a chance that implementation in the U.S. might not bear the remotest resemblance to any other market. EMV compliance will be "voluntary," due to the lack of a central regulating authority with the power to impose a mandate and timelines, and that could change everything — including whether ISOs decide to migrate at all.
Still, there is that liability shift. And there are the banks that, as card issuers, have considerable incentive to work with the major card brands. In Canada, said King, "[T]he real drivers were the banks. When the banks came on board and said, 'We're doing this,' they actually were the first to finish."
Once this happened, Canadian banks were empowered to — and did — refuse transactions from any non-EMV compliant white label ATMs they deemed insecure, King said. Which was all the incentive many ISOs needed to get on board with EMV.
To NFC … or not to NFC?
Another unique factor in the U.S. is NFC. Many POS vendors are now selling equipment that accommodates both contact EMV chip payments and contactless EMV and NFC chip payments.
For ATM operators, this presents difficult questions: Will NFC leapfrog EMV in the U.S., making the latter DOA? (Probably not, says King, since the rest of the world uses contact EMV and isn't likely to upgrade to NFC in the near term.) Does it make sense for ATM deployers to install a technology that is widely regarded as suitable only for attended, low-value transactions?
On the other side, once contactless capabilities are in place, will consumers — 44 percent of whom now own smart phones — push the wholesale adoption of mobile wallets? If so, will it happen in less than 10 years — the average life of an ATM?
"I think a lot of larger ISOs and retailers lately seem to be looking at it as an EMV and an NFC solution," said James Phillips, VP of sales and marketingat Triton Systems. "Meaning that they don't want to have to go through an EMV upgrade only to have to go to an NFC upgrade down the road. They'd like to implement both at once."
The Big Question
But this brings up considerations of cost, Phillips said. "We've got especially the larger ISOs with the larger fleets wanting to understand what the economic impact is going to be to them to have to upgrade a thousand, five thousand, ten thousand machines," he said. "You're probably going to be looking in the neighborhood — ballpark price — of five hundred to a thousand bucks for an upgrade. And that's just for the hardware."
At that price, a liability shift might seem to be the most useful motivator for EMV adoption by ISOs. In fact, said McCarley, "[U]ntil there is a mandate that really affects them, no ISO will be spending any money on this. We as a processor do not have the same luxury and will have to prepare because there might be one ATM somewhere ... that is EMV."
Except for one thing: As more deployers switch to EMV, the pool of ATMs available for skimming shrinks, and non-EMV compliant machines become increasingly attractive targets. Card issuers could elect to cut off these ATMs due to the loss risk they represent.
It's something ATM distributors should think about while they wait for an EMV spec, King said, along with all the rest of the costs and consequences of enabling EMV — or choosing not to. "Our message to our distributors has been, 'The last thing you should be doing is putting your head in the sand.'"
For more on this topic, visit the EMV research center.
About Suzanne Cluckey
Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.
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