Holding Out on Your ATM EMV Upgrade Could Lead to Real Losses


EMV has put a heavy burden on financial institutions. New chip-ready cards have increased the costs of running credit and debit programs not to mention the headaches of slow turnaround on the development and issuing of the new plastic.

Yet, after the cost of bringing the issuing side of their card programs up-to-date to protect their institutions against fraud, many FIs have not upgraded their ATMs to EMV. Or they are thinking of it as a low priority expense rather than a real liability – especially since ATM fraud has traditionally been handled by the institution.

What many banks and credit unions may not realize is the additional risks they may be taking by waiting to upgrade – including a significant increase in monetary risk.

Increased Risk of Fraud at Non-EMV Compliant ATMs

Experiences in other areas of the world already migrated to EMV have shown that criminal activity flocks to the lowest common denominator – non-EMV compliant ATMs.

In just one example of this type of fraud migration, a May article from CNN Money reported a bank in South Africa losing over $13 million in just over two hours…from non-EMV compliant ATMs in Japan. Under the fraud migration rules taking effect in the U.S., operators of the non-compliant machines are responsible for these types of fraud losses.

Discussing their experiences in EMV migration at the 2014 ATM & Mobile Innovation Summit, Citibank Latin America made special note of the speed at which fraudsters locate and profit from non-compliant machines.

“Don’t play the numbers game,” said Alvero Cordoba, ATM & channels head for Citibank Latin America. The bank encountered a situation where, due to an increase in fraud and other factors, they had decided to reduce their ATMs in a specific country from thousands to a mere three hundred. “The next month,” said Cordoba, “the fraud had increased. On just those three hundred ATMs.”

EMV compliance at the ATM ensures additional security for the institution operating those machines, in addition to the added benefits for cardholders utilizing the machines.

However, for those banks and credit unions unable to afford the EMV upgrade on top of their more expensive and newer accountholder-based initiatives such as Apple Pay and mobile applications there are other options.

EMV Options for Financial Institutions

Rather than risk a significant increase in fraudulent use of the ATM, some smaller community banks and credit unions could select to shut down their machines. However, this strategy could risk the ire of accountholders based on the loss of a standard convenience on which they have come to expect.

Another option is to look into ATM outsourcing. The right contract could eliminate the need to worry about upgrading machines for EMV by removing ownership and management liability. Proper outsourcing would remove the machines from the books and place the cost and risks of upgrades, maintenance, management in the hands of ATM experts.

With the MasterCard EMV liability shift for ATMs fast approaching, it is important for FIs to fully investigate their options, or potentially face the reality of fraud migration head-on. Rather than “playing the numbers game” it is best for each institution to explore all of their options – and figure out which strategy will be the right fit for their cardholders… and their budget.

Paul Albright
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

Troy LeBlanc
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.