ATMs and EMV


More chip-card liability changes loom from MasterCard and Visa

By Don Sadler

One October deadline for upgrading to chip-enabled terminals has passed, but another one still looms ahead. Although last month saw a deadline that changed fraud liability for point-of-sale credit and debit transactions for chip cards, community banks should be planning for a similar deadline for ATM transactions.

Beginning on Oct. 1, 2016, for MasterCard and Oct. 1, 2017, for Visa, community banks that haven’t enabled their ATMs to process chip transactions will be liable for fraud costs from any transactions at their ATMs where consumers use chip cards. The fraud liability shift by Visa and MasterCard exposes a bank to possible fraud losses when another bank’s chip-card customers use its ATMs that cannot process chip transactions. Conversely, the liability shift will protect a bank from fraud losses when its cardholders use another bank’s ATM that cannot process chip cards.

“With timelines in place for a shift in liability, the total cost of card-present fraud in the U.S. will no longer be borne solely by card issuers,” explains Mark Tankle, senior director, ATM business unit for Cummins Allison, a bank equipment manufacturer in Mt. Prospect, Ill. “After the prescribed dates, liability for counterfeit fraud shifts to the least EMV-compliant party.”

“If a mag-stripe card is used, then the old chargeback rules still apply,” notes Liang Han, executive vice president at ICBA Bancard, ICBA’s electronic payments services program for community banks.

With the ATM liability shift one to two years away, Han says community banks should begin planning how they will upgrade their ATMs to process chip-card transactions. “Most banks are card issuers and ATM owners,” he says. “They don’t want to be the last to upgrade their ATMs and be responsible for mag-stripe ATM fraud.”

Tankle says community banks have two options: Either upgrade or replace their current ATMs to process chip-card transactions. Conceivably banks that operate ATMs that can’t process could stop processing ATM transactions by noncustomers after the October liability changes. “Implementing upgrades to existing ATMs can be costly, so if a machine is at the end of its seven- to 10-year life cycle, replacing it might be the right choice,” he says.

According to industry sources, it can cost thousands to upgrade an ATM. The price of a full-function new ATM with chip-reading capabilities varies widely based on the machine’s functionality, but generally ranges from $50,000 to $80,000.

“If a mag-stripe card is used, then the old rules still apply.”
—Liang Han, ICBA payment card expert

Randy Vanderhoof is the director of the EMV Migration Forum, an entity created by the Smart Card Alliance in Princeton Junction, N.J., to promote the adoption of chip technology. He says such planning for processing chip cards at ATMs should balance the cost of upgrading or replacing ATMs with a bank’s tolerance for shouldering any possible fraud liability after the liability changeover dates.

Vanderhoof also warns that—similar to the lengthy production time frames banks faced in issuing chip cards to their customers—upgrading or replacing ATMs to process chip-card transactions could be a months-long process. “Chip migration can be a nine- to 12-month project or longer from inception to implementing the first chip-enabled ATM in the field,” he says. “If you wait too long, you could be waiting for vendor time and certification time slots and could struggle to meet liability shift deadlines.”

Don Sadler is a freelance writer in Georgia.