United States

Creating opportunities when implementing EMV requirements

FINANCIAL REPORTING INSIGHTS  | 

EMV is a worldwide standard developed as the result of collaboration between Europay, MasterCard, and Visa for the processing of integrated circuit cards (IC cards or chip cards) by devices capable of reading and deciphering the security built into these cards. These devices include point of sale (POS) terminals for use at merchants and vendors, and automated teller machines (ATMs) for dispensing cash. This standard has proven to reduce fraudulent activity by making it more difficult for thieves to produce counterfeit cards. The United States has been slower than many other countries in implementing the EMV standards, and some analysts believe that delay is causing organizations in the United States to become increased targets for fraudsters. 

Currently, the major networks plan to implement the liability shift from the credit card issuers to merchants by Oct. 1, 20151 in the United States, but many financial institutions and merchants are working to accelerate this timeline due to the recent issues from data breaches and pressure from Congress for change. Considering this timeline, what is your organization doing to prepare for the new EMV standards? With this deadline quickly approaching, here are some considerations to help you navigate through these changes and take advantage of the opportunities they present.

Marketing and strategy

With the need to replace every one of your cards in possession by your customers, how can you turn this negative situation into an opportunity to better promote your organization? Do you have plain, solid colored cards with just your logo on them, or does your card stand out in the crowd? Your customers show this asset of your organization to possibly hundreds of people a week. Take this opportunity to look at how you are marketing your organization and see if there are ways to redevelop your strategy, or offer new programs such as merchant-funded rewards, which could in turn increase your customer base and usage rates. 

Once you’ve made the change and are using this new technology, how are you promoting this for your organization? If you have the opportunity to get out ahead of your competitors and offer this increase in security before others, use it to your advantage. Promote that your organization is committed to keeping your customers’ money and personal information safe, and that you are investing to implement even before the required deadlines.

And once the changes occur, how will you educate your customers about the changes? The new standards may involve customers using their cards differently by requiring a PIN for every purchase, and for online purchases, it may require an additional handheld device for authorization. In an ever changing world of technology, we need to ensure customers still have ready access to their money. Consider the literature you’ll need to develop and possibly even training sessions to keep your customers – and customer service representatives – informed of the new solutions so they can be prepared for these changes. 

Contracts and fees

How often do you review your contracts with external vendors who assist with any card processing operations for your organization? Best practice is to review your contracts annually; however, working through changes such as those imposed by the new EMV standards is a great opportunity to review these agreements. Not only is it important to ensure your organization can follow the new required standards, but it is also just as important to make sure your vendors are following them as well.  

If your vendors haven’t already begun working toward the new requirements, ask for their implementation plan to understand timelines and goals to see how they will match up with your strategies. Your organization may need to adjust plans, but don’t be afraid to push back on the vendor or possibly start looking for a better solution. Many times there are multiple vendors that can provide a solution for you, and even though another change may not be desirable, it may be best in the long run. Don’t be held captive by your vendors; they are there to work for you, not the other way around. 

You can also take this time to look at the fees charged to customers associated with your accounts and customer card usage. The cost to produce these cards will be significantly higher than that of magnetic stripes, so while looking at card replacement fees, see if there are opportunities to adjust other fees. Many times account fees have not been adjusted for years, so this can be an excellent opportunity to increase revenue, which may help offset some of the costs associated by the new mandates.

Cost of not changing

Maybe your organization will complete a thorough analysis of the required EMV mandates and not see some of the benefits described above. In this case, what would it cost for you to not comply with the new requirements and assume the risks by not changing?  It is always best practice to complete a risk analysis to determine how any change will affect your organization. But an obligation from an outside party does not always necessitate a change on your part, there is always an alternative. Understand the risks that your organization could assume by delaying or foregoing implementation of EMV and determine if they are more or less costly than all the components required to meet the new standards now. 

Also, be sure when performing your analysis that you are looking toward the future. The cost of a current risk may not be the same in the future. Although no one can predict the future, there are certain variables that we can estimate will change. In the case of EMV, these new mandates are being put in place to reduce fraud because thieves are becoming savvier and technology is only increasing to allow them to perform these actions more easily. The new technologies from EMV are being put in place to combat the thieves, so be prepared that these risks will constantly increase and may change your outlook on your analysis.

In addition to direct costs in the future, understand what other impacts may occur due to not adopting the new standards. Many countries are discussing not accepting magnetic stripe cards in the future, so how would this impact your customers who travel overseas? What would happen if U.S. merchants stopped accepting these cards and you inevitably would need to change anyway? How many customers would you lose during this time period and how would that impact your organization? Don’t just think about the direct costs of not changing, but remember many of the indirect costs, such as loss of customers, that can be harder to predict.

In closing, the new standards that will be put in place by EMV will require many changes for your financial institution, which can be difficult. However, preparing properly for them can be a valuable asset for your organization. Assess your risks, develop your strategy and work toward your solutions. Preparation is the key to a successful implementation and can help separate you from the competition.