Why EMV liability shifts shouldn't freak you out

It's easy to understand why many community financial institutions are in a panic about the impending inter-regional liability shift for ATM fraud. Introduced by MasterCard not long ago, the April 19 deadline has received quite a bit of news coverage and attention from industry groups, causing many community banks and credit unions to be concerned about their fraud-loss position.

Their anxiety is only elevated when respected entities like the National ATM Council speak out about the country's inability to be "financially or operationally" ready. In fact, the council recently called on MasterCard to delay their April 19 deadline, as they insist the country's ATM infrastructure will not be EMV ready in time.

However, MasterCard is only applying it to those fraud cases where an international-issued chip card was used at the ATM in question. If after April 19, a U.S. ATM used by a fraudster is not EMV-compliant, the ATM owner (i.e., the FI) will be liable for the losses. But this is only in the case that the compromised card was issued by a foreign bank. Domestic liability shifts for MasterCard are scheduled for October 2016. Visa's liability shift for all transactions is slated for October 2017.

So, community banks and credit unions need to ask themselves: How many foreign transactions (and associated dollar volume) are even occurring at our machines? This will help the institution determine their potential risk. If these ATM acquirers serve cardholders in California, Florida, a major metropolitan area, or perhaps in riskier locations like hotels and casinos, their answer is going to differ dramatically from that of a community bank in Nebraska, for instance.

International ATM fraud in smaller communities is possible. However, institutions in these locales must evaluate their own transaction histories to get an accurate barometer of the risk they are facing.

The point: If your community FI's ATMs are not likely to be EMV-ready by April 19, evaluate your risk. It's likely the amount of risk will allow you to take your time and do it right. It's possible the MasterCard liability shift may not have much of an impact on your community FI.

Reprinted from the Shazam Network blog by permission.