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EMV adoption … not fast enough!

How FIs can help speed things up

EMV adoption … not fast enough!

We knew this was coming and still we “drug our feet.”

The reason not to roll out EMV cards before Dodd-Frank was that it cost too much to change the card readers and systems at the merchants and acquirers. After Dodd-Frank, the delay was due to the impact of the law’s network exclusivity restrictions.

Up until Target, Visa and MasterCard weren’t working very hard to resolve the issue domestically and waiting for the courts to decide the matter. I would like to remind MasterCard and Visa that EMV stands for Europay-MasterCard-Visa and was invented by the card brands first in Europe. The motivation in Europe was to reduce fraud due to the lack of a common online infrastructure. The United States is the only country in North America that does not have an EMV debit card available. Case in point: I was in Canada two weeks ago and if I did not have an EMV credit card I would not have been able to buy a thing! I could not use my debit card or non-EMV credit cards. The mag-stripe reader at the terminals I tried to use was disabled. Only the EMV chip reader of the terminal was enabled.

EMV debit cards are still not available domestically, but there is hope on the horizon. Visa and First Data just announced a new technology that will be available for licensing to card production companies that solves the merchant choice option and makes EMV debit cards available.

Be still my heart! Not to be skeptical, but does this sound like we didn’t install a stop light until after a pedestrian got run over? Recent estimates indicate that the Target breach will cost the industry as a whole $1.1 billion. That is almost governmental in scale. My thought is this: Concern about further card based legislation by virtue of the most recent fraud motivated the industry to collaborate and innovate uber fast!

On the flip side, I am sure that we could have replaced all of the card readers in the country for about $1.1 billion and have a few bucks left. Due to industry inaction, we are going to have to pay twice the price.

To accelerate the EMV adoption in your neighborhood I would first suggest that no financial institution should renew their card production or card transaction processing with their vendor without the following:

1. A written commitment to implement EMV within 2014, with guarantied pricing. Let’s get serious about this issue.

2. A written commitment to provide instant-issue EMV technology for institutions that do not want to wait for the card fraud replacement volume that is slowing down your regular orders and enraging your customers.

3. Don’t purchase an ATM or cash dispenser without an EMV card reader.

4. Don’t upgrade your teller systems without EMV card reader enabled pin pads.

Finally, financial institutions should also insist that Visa and MasterCard change their rules and hold merchants accountable for the costs these breaches cause and reimburse the banking industry.

Maybe then, all players will get serious about card security.

Dan Fisher

Dan Fisher is president and CEO of The Copper River Group, a consulting firm headquartered in Fargo, N. D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He was CIO of Community First Bankshares (now part of Bank of the West), has served as a director of the Federal Reserve Board of Minneapolis, the chairman of the American Bankers Association Payment Systems Committee, and was a member of the Independent Community Bankers of America Payments Committee. Fisher has written numerous articles on banking technology and the payments system. He has authored or co-authored six books and recently published a book titled, "Capturing Your Customer! The New Technology of Remote Deposit." You can contact Fisher at dan@copperrivergroup.com.
P.S. To understand Dan's nickname, check out "About the Wombat" on his website.       

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