EMV migration is going to be an expensive endeavor for credit unions. Card issuance will require licensing of authentication IDs, and production of new plastics will now cost two to three times more than magnetic stripe cards. ATMs will also need new hardware and software. On top of all of this, credit union members will need to be educated on the new payments process.
Fortunately, there are ways to reduce costs and frustration during implementation. Here are a few.
1. Card Design
While selecting from the many generic EMV plastic designs now available can help reduce pricing, many credit unions are currently using customized credit and debit card designs that need to be modified due to the location of the EMV chip.
Credit unions should obtain an EMV card design template from their plastics manufacturer and ensure their design will work with the chip. Remember, there are approximately 10,000 financial institutions going through the same process. In-depth discussions and planning with your plastics provider will prevent a last minute design compromise and help reduce the possibility of a delay in your timeline.
2. Credit Cards vs. Debit Cards
Does it matter when it comes to EMV? No, both credit and debit cards need to be converted to the U.S. EMV standard.
However, most credit unions have fewer credit cards than debit cards; therefore, it is recommended that you tackle the credit card portfolio first. This allows project managers to become familiar with the conversion steps on a smaller group of cards before setting their sights on the larger, more active and sensitive debit card portfolio.
3. Analytics / Card Issuance
Typically, only 45% to 55% of the cards in a debit card portfolio are active with at least one transaction in the last 30 days. Many cards are never activated. Some are activated but never used and end up occupying space in a wallet or file cabinet drawer.
With the high cost of EMV plastic, creating a program targeting only active cards for EMV upgrade could help reduce initial costs.
A secondary strategy to determine whether your members with inactive cards plan to ever activate or use the card can also help reduce overall expense, eliminating cards that opt out of the program. Few credit unions focus on the card activation process.
If you are going to spend money to create and issue EMV cards, you need to ensure the cards are getting activated and used. Pay attention to account activity and card usage reports. If members aren’t reaching for your card after 30 days, they have someone else’s card at the top of their wallet.
4. Outsourcing ATMs
U.S. ATMs need to support EMV by October 2016. The manufacturers still need to complete software development, supporting the U.S. Authorization IDs. These AIDs allow the ATMs to continue utilizing the routing schemes currently used by ATM operators.
The first half of 2016 will be busy certifying terminals with processors, visiting every ATM to install new software and activating EMV card readers. International EMV upgrade experience has taught us to expect some maintenance-related expenses during the switch due to the new clamp process for reading EMV cards and a certain level of user error.
These additional processes and expenses are adding to the credit unions’ burden of operating ATM fleets. ATM outsourcing leverages the economies of scale that larger ATM deployers enjoy while allowing credit unions to reduce the cost of maintaining and updating ATMs.
Additionally, credit unions can recapture a portion of the capital originally invested in the ATM by selling this asset to the outsourcing company taking over their ATM management. This process transfers the processing, liability and maintenance of the ATMs to the new ATM owner.
5. EMV Member Education
EMV can be supported in a contact and contactless environment. To facilitate the contact transaction, the microprocessor in the card transfers data with the acquiring card reader, requiring constant physical contact with the card reader.
Near Field Communication or contactless readers, require a close proximity of the card to the reader in order to complete the transaction. Both processes eliminate the card swipe.
Members need to be made aware of the impending change to their payment habits through consistent literature and messaging before and after the switch to EMV.
Without proper education, the member could experience a higher frequency of incomplete transactions or damage to the plastic, if they attempt to forcibly remove the card from an EMV-enabled card reader. Both scenarios will result in fewer completed transactions, lower interchange and higher card replacement expenses.
There are many ways for credit unions to reduce stress and costs surrounding the upcoming EMV migration in the U.S. However, all of them require advanced planning and an increase in communication with vendor partners and cardholding members.
The sooner you make your EMV transition plans, the more likely you are to save money, avoid the rush and limit issues such as inventory shortages, technical challenges and member confusion.
Published in Credit Union Times • January 23, 2015
An industry leader in the payments space, Paul Albright is Executive Vice President of Outsource ATM.
Connect with Paul on LinkedIn or follow him on Twitter.
President & CEO of Outsource ATM, Troy LeBlanc has been helping financial institutions address their ATM needs for almost 20 years.
Connect with Troy on LinkedIn or follow him on Twitter.