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Large banks and card issuers are ready for the U.S. shift to chip-and-PIN technology, according to a report issued Wednesday. But the drop in fraud that is expected to result is unlikely to come any time soon.
March 18 -
Many card issuers are well on their way to the migration to chip cards or have a plan to do so. But many merchants are still completely unaware of the shift in fraud liability taking effect Thursday.
October 1 -
The deadline for EMV migration in this country is this Thursday. Here's what will and won't happen on that day, and what challenges lie ahead for banks and their customers.
September 28
Credit card networks and issuers have done a poor job in explaining the implications of the just-passed Oct. 1 deadline for moving to EMV chip-and-PIN cards, leaving many small businesses confused, lawmakers said Wednesday during a hearing on Capitol Hill.
The deadline, which was set more than four years ago, imposes liability on merchants who are not equipped with chip readers if counterfeit fraud occurs as a result of the use of a chip-enabled card in their store.
"A lot of my small businesses did not comprehend what was happening," Rep. Janice Hahn, D-Calif., told Stephanie Ericksen, Visa's vice president for risk products, during a hearing in the Small Business Committee.
Ericksen replied that Visa has been engaging in outreach, including a "small business education tour" that will be in Chicago next week.
"The processors are also responsible for communicating that to them," she said.
But in a tense exchange, Rep. Nydia Velazquez, D-N.Y., argued the switch to EMV, which the industry hopes will reduce fraud, should result in lower interchange fees.
"If EMV successfully reduces fraud, will Visa commit to reducing swipe fees on its cards commensurate with that fraud reduction?" she asked.
Visa's Ericksen responded that credit card networks still need to spend substantial time and resources combating fraud.
"The criminals continue to invest in strategies in being able to commit fraud as well," Ericksen said. "So we need to continue to invest in the ability to address that fraud."
"I just can't help myself but laugh," replied a stony-faced Velazquez.
But financial services executives testifying during the hearing expressed unhesitating support for the shift.
Paul Watson, president and chief executive of $179 million-asset TCM Bank in Tampa, said that it might take months or years for many small businesses to follow the lead of national retailers and enable EMV chips at cash-out counters.
"Oct. 1 is not a deadline," he said. "Instead, the liability shift serves as a catalyst for change… Most small businesses are taking a very prudent approach to this migration. They are not buying from the first terminal salesman that makes the phone call."
Community banks can play a crucial role in easing the transition, he added. "They serve as the feet on the street."
Jan N. Roche, the president and CEO of the $1.7 billion-asset State Department Federal Credit Union, called EMV "the new market standard for combatting fraud at the point of sale."
Roche, who was testifying on behalf of the National Association of Federal Credit Unions, warned, however, that the technology "is not a silver bullet solution to the broader problem of data security."
Roche said that once the EMV shift's impact on counterfeit fraud kicks in, online and mobile fraud are liable to rise.
To obtain a "truly secure payment system," she said, authentication technologies - including biometrics, tokenization and other forms of encryption, must be implemented as well. "There's no panacea to avoid data theft."
