Article

Interac offers ATM ISOs alternatives to comply with chip migration

September 29, 2010

The Interac Association has given Canada’s ISOs two alternatives to comply with the country's first EMV deadline for cash dispensing, non-deposit ATMs.

The ISOs, which own and operate non-bank ATMs, must have 50 percent of their machines chip-enabled by Dec. 31, 2010, or, as an alternative, have 80 percent of their cash dispensers that are considered high-risk meet EMV standards by the end of the year.

“The option was communicated to our members this year,” said Tina Romano, spokesperson for Interac, which links the proprietary networks of Canada’s banks and credit unions to allow them to exchange financial data. “There are a variety of factors that determine whether an ABM [ATM] is high-risk, such as geography, volume, etc.; however, for security reasons, we do not disclose detailed specifics.”

Doug Epp, senior director of sales for Transaction Network Services Canada, owner of processor Calypso Canada, expanded on Romano’s explanation.

High-risk ATMs are machines in which thieves have used counterfeit debit cards to steal cash, Epp says. Canadian ISOs have deployed 35,000 to 36,000 off-premises ATMs and 25 percent, or 9,000 machines, are considered high-risk. Fewer than 5 percent of the high-risk ATMs have been upgraded so far, he says.

Fraud at off-premises ATMs is expensive.

“Royal Bank of Canada estimates annual off-site ATM fraud to be in excess of C$140 million (U.S. $136 million),” Epp said. There are an estimated 300 to 400 Canadian ISOs, and if they do not meet Interac’s requirements by the organization’s deadline, they will be sanctioned, Romano says.

Romano did not disclose the penalties, but Epp says ISO owners will be fined C$100 annually for each machine that is considered to be high-risk. Canada’s banks also may stop accepting transactions from the suspect machines, Epp says.

With the deadline looming, Calypso Canada’s processing platform — which certifies ATM chip transactions for Interac, Visa Canada and MasterCard Canada — recently urged ISOs to speed up upgrades to their machines.

“The clock is ticking as these revised regulations reaffirm the Interac Association’s commitment to moving the Canadian market over to more secure chip technology,” Epp said.

Calypso’s goal is to educate ATM owners.

"We want to make them [ISO owners] aware of the timelines. We also want to offer them counseling," he said. "If companies decide to use Calypso’s services, Calypso will offer clients three months free processing, which can range from C$50 to C$100 per ATM, depending on the machine’s transaction volume."

ATM upgrade kits are expensive, ranging from C$1,000 to C$1,500 each, Epp says.

"Upgrade kits do not generate revenue. They are the cost of doing business," he said.

The final deadline for ATM EMV compliance is Dec. 31, 2012.