EMV 360 Roadmap to EMV

Transcription

1 EMV 360 Roadmap to EMV MCUL & Affiliates 2014 Executive Summit In Cooperation with CUES Presented by Michelle Thornton September 18, 2014 Sponsored by:

2 Agenda Overview How EMV Works Industry Readiness Evaluating EMV For Your Credit Union

3 Global Adoption EMV initially adopted to combat fraud in areas where offline authorization was the norm France, the first country to deploy EMV, experienced 80% decline in counterfeit fraud activity 2.4 billion cards issued 47% of all payment cards 36.9 million POS devices in circulation 87% of all POS devices Source:

4 U.S. Timeline In 2011 Visa, MC, American Express, Discover announced liability shifts beginning October 2015 Durbin requires two non-affiliated networks on debit Just one problem though. EMV was never designed to do this. EMV was designed so that transactions only go to the network specific to that chip on that specific card, there is no room for choice. One chip, one network, using a single Application Identifier (AID). That is how EMV was designed. Industry waited while a solution was hammered out Source:

5 Solution Early 2014

6 How EMV Works

7 What is EMV? What is a chip card? The terms EMV and chip used interchangeably A chip card has a magnetic stripe and a small microprocessor embedded into it The chip contains an operating system and one or more applications The microprocessor and contact plate are mounted on the front of the card The microchip is encrypted, which means that it is extremely difficult to copy or counterfeit

8 How does it work? Chip cards are miniature computers with an operating system and multiple interfaces and applications In an EMV scenario, a cardholder inserts an EMV card into the reader The card and terminal enter into a dialog

9 Cardholder Verification Methods Online PIN, where the PIN is encrypted and verified online by the issuer (host) Offline PIN, where the PIN is verified offline by the chip on the card CVM Signature verification, where the cardholder signature is compared to the signature on the card No CVM (typically for low value transactions)

10 Credit Solution One AID Visa VSDC App Visa Standard AID

11 Debit Solution Two AIDs Visa VSDC App Visa US Common AID Visa Standard AID

12 Network Choice & Portability Common AID enables terminal to use BIN routing tables Merchant or ATM acquirer chooses network Issuer can move between networks without reissuing cards

13 Merchant Readiness

14 Merchant Readiness

15 Terminals Not Quite Ready Terminals being installed Can work for credit but debit common AID not ready Code required to choose the common AID Infrastructure working to catch up to solution

16 Relative Number of POS Terminals *Edgar, Dunn & Company

17 ATMs Not Ready Either Terminal issue with Common AID extends to ATMs NCR and Windcor nearing readiness Other manufacturers working on code Without Common AID code complete, transactions follow standard EMV rules of sending to global networks or giving cardholder choice of AIDs

18 Liability Shift October 1 st

19 Liability Shifts, Not Mandates April 2013 ATM: Maestro international transactions October 2015 POS: counterfeit fraud liability shifts to least secure, Visa, MC, Amex, Discover October 2016 ATM: All MasterCard brands October 2017 ATM: Visa Automated Fuel Dispensers Issuer shifts fraud only if merchants don t terminalize. Acquirer shifts fraud if issuers don t issue EMV cards.

20 Fraud Savings EMV will definitely reduce fraud losses eventually Merchant terminalization Retention of mag stripe EMV will reduce fraud from counterfeit cards EMV does not impact card-notpresent fraud Card-not-present fraud expected to rise

21 In Millions Canadian Fraud Statistics (EMV began in 2009) Interac Association announced that Interac debit card fraud losses to financial institutions resulting from skimming declined again in 2011 "Our collective efforts and significant investments in the fight against debit card fraud, particularly the transition to chip technology, are producing tangible benefits," said Caroline Hubberstey, Head of External Affairs, Interac Association. Toronto 3/16/2012 Dollars Lost to Debit Card Fraud $160 $140 $142 $120 $100 $80 $60 $70 $95 $107 $105 $119 $70 CO-OP estimates that approximately 50% of fraud is due to counterfeit cards created from skimming. $40 $20 $ Year Interac is the PIN debit network in Canada

22 Global Interoperability International travelers are experiencing some issues with magnetic stripe cards Industry estimates that chip only terminals less than 5% of terminals worldwide 99.9% chip terminal adoption rate in Europe Source:

23 What Does This Mean For Credit Unions?

24 Timing & Planning EMV is expensive Issuance Strategy Chip & PIN or Chip & Signature ATM Strategy Member Impact Staff Impact The common U.S. AID simplifies efforts for the industry, but commercialization will take time Industry experts expect conversion to EMV to take 10 + years

25 Will tokenization & mobile leapfrog EMV? EMV is not THE answer but AN answer EMV not likely to be abandoned anytime soon Tokenization: great promise Mobile: inevitable

26 CO-OP Readiness Certified Visa and MasterCard, credit, debit and ATM In beta testing for Common AID (Visa and MasterCard) NCR Common AID expected end of year Leadership Active participation in EMV industry groups, such as the DNA CO-OP: board member and one of founding members EMV Resource Center:

27 Road Forward Research EMV and determine timing for your credit union 2015, 2016, 2017? Contact CO-OP Strategic Relationship Manager when ready to move forward

28 More resources at Visit the CO-OP EMV Resource Center ( for up-to-date information White Papers Blogs Budgeting Tool Card Plan and Worksheet Tool Kit FAQs Glossary ABCs of EMV Ask the Expert Links to other resources Webinars download the slides or listen to the recording from any of our series of EMV webinars.

29 Questions? More resources available at the CO-OP EMV Resource Center: