1) Merchants and credit unions have been slow to fully adopt EMV chip cards due to costs of upgrading systems and potential issues with longer transaction times. 2) However, the liability shift for fraudulent transactions moved to any non-EMV compliant merchants after the October 2015 deadline. During the busy holiday season, some merchants realized the risks of this and are now more motivated to upgrade. 3) As we move into 2016, credit unions and merchants will focus more on fully implementing EMV with a renewed emphasis on security, though adoption challenges around costs, technology, and consumer acceptance remain.

1. T O O L S O F T H E T R A D E
Credit unions, merchants,
and consumers haven’t exactly
rushed to embrace chip-embedded
credit and debit cards that prom-
ise to decrease fraud, but look
for a renewed emphasis on EMV
(Europay, MasterCard, and Visa)
technology now that the holidays
have passed.
Many merchants—large and
small—continue to rely on magnetic
stripe technology. That’s even after
the Oct. 1, 2015,
shift that made
them liable for
fraud losses in
card-present trans-
actions if they didn’t offer EMV ter-
minals to consumers with chip cards.
Only 40% of merchants expected to
comply with EMV by year end, says
creditcards.com.
That lax adoption rate doesn’t
stun Barry Sloane, president/CEO at
Newtek Business Services, a CUNA
Strategic Services alliance provider.
“We viewed Oct. 1, 2015, as the
start of EMV rather than the end
point,” Sloane says. “Merchants had
been reminded in 2014 about the
liability shift. But faced with the
normal demands of running their
businesses, naturally many didn’t
focus on this important matter.”
Ramp-up for the holiday season
likely commanded attention that
merchants otherwise could’ve focused
toward EMV. But merchants lacking
EMV terminals realized during the
high-sales period they ran the risk of
selling “fenceable” goods—products
that criminals can easily resell—to
customers who used fraudulent credit
or debit cards, according to Sloane.
“Merchants
who were in that
situation are far
more likely now to
become EMV com-
pliant, as they sensed the exposure
to their own businesses,” says Sloane,
who adds that hearing anecdotal
fraud stories from other merchants
also will encourage laggards to take
action.
EMV’s slower transaction process,
combined with consumers’ learning
curve, discouraged merchants and
credit unions alike from accelerating
their chip card system rollout, indi-
cates Michelle Thornton, director of
product development at CO-OP
Financial Services.
Only 38% of credit unions antici-
pated their credit card program to
comply by the EMV liability shift,
according to CUNA’s 2015 Credit
Card Survey, and 36% of credit
unions didn’t expect full EMV
functionality until at least the end
of 2016. Two-thirds of credit unions
planned a rolling reissue of EMV
cards based on member need and
card expiration.
“Credit unions had been wait-
ing until after the winter holidays to
commit. They didn’t want consumers
caught in long lines as the people
ahead of them tried to figure out
how to use their EMV cards,” Thorn-
ton says. “When credit unions do
start issuing EMV cards, they’ll do
it in a slow stream to insure smooth
distribution as well as a chance to
iron out wrinkles.”
Technical aspects aside, simple
human elements can complicate
EMV acceptance. “One roadblock is
credit union members who think an
EMV card has all of their informa-
tion on it, including Social Secu-
rity number, and bank and credit
account numbers,” says Docia Myer,
vice president of the U.S. sales divi-
sion at CPI Card Group.
The EMV transition comes at a
steep price, but with the potential
for hefty rewards. New point-of-sale
(POS) terminals for merchants
and new cards for consumers will
collectively cost at least $6.8 bil-
lion, according to Javelin Strategy &
Research.
But EMV consistently has reduced
card-present fraud in other coun-
tries that have adopted the technol-
ogy—for instance, a decrease of 33%
in overall card fraud in England
per the UK Card Association, and a
73% reduction in debit card losses
in Canada according to the Interac
Association.
New Year Brings Renewed Emphasis on EMV
With holidays behind them, merchants and CUs will accelerate adoption.
Patrick Totty
‘We viewed Oct. 1, 2015, as
the start of EMV rather
than the end point.’
Barry Sloane
48 C R E D I T U N I O N M A G A Z I N E u F E B R U A R Y 2 0 1 6 u n e w s . c u n a . o r g
© 2016 Credit Union National Association Inc. Reprinted with permission.

2. Onsite problems cause delays
Among the merchants that have
accepted EMV and installed EMV-
capable terminals, some problems
linger.
“The terminals might differ in
design and the ability or requirement
for consumers to enter their [personal
identification numbers],” Thornton
says. Also, magnetic strips will remain
on credit and debit cards for some
time, but gradually will fade from
existence. “Some countries already
have EMV cards with no magnetic
stripe.”
Tardiness in accepting EMV isn’t
limited to small or regional mer-
chants. “Among
the large U.S. mer-
chants and institu-
tions, Walmart isn’t
accepting EMV
debit cards, and
the U.S. Postal Service isn’t accept-
ing EMV at all,” Myer says. “Home
Depot and Target are. But we’ll soon
see all major retailers move to EMV
acceptance because merchants don’t
want the liability that comes with
magnetic stripe technology.”
Will merchants encounter obstacles
integrating sales on pre-EMV termi-
nals with EMV-enabled terminals?
Sloane doesn’t think so: “The payment
methodology isn’t impacted.”
Meanwhile, card processors
have done much to encourage pay-
ment card industry (PCI) compli-
ance throughout the chain, which
strengthens the overall network,
according to Sloane. “Processors
have been quite effective in issuing
penalties for PCI noncompliance
as a means of creating new behav-
iors from merchants,” he says. “The
percentage of compliant merchants
has increased, partly due to the
increased pushes by processors
because of the EMV shift of liability.”
Members will drive adoption
Even though many credit unions
have geared themselves up for EMV,
not everybody has boarded the band-
wagon.
“Most credit unions have a
plan regarding when to start issu-
ing EMV cards and at what pace,”
Thornton says. “The key is to com-
municate with and educate members
about the changes, and how to use
EMV cards. Along those lines, we’ve
helped credit unions in two areas:
budgeting and communicating EMV
information to members across all
channels—online, newsletters, and
mobile devices.”
Enlightening members to the
advantages of EMV technology likely
will increase their interest in
obtaining
credit union-
branded
cards, which
in turn creates
momen-
tum among their favorite retailers
to adopt EMV, according to Sloane.
“Consumer awareness of the new
‘chip and dip’ technology might spur
merchants’ acceptance of EMV to
meet the demands of their clientele,”
he says.
Some credit unions have taken
a wait-and-see stance to chip-card
adoption, as evidenced by the 7% of
credit unions that as of mid-2015 had
no plans to transition to EMV, accord-
ing to CUNA’s survey. Conversion cost
can be an obstacle. Credit unions
budgeted an average of $35,000,
ranging from $15,000 for institutions
with less than $50 million in assets to
$120,000 among organizations with
$500 million or more in assets.
“They want to see how it works
with other credit unions before
making the change,” Thornton says.
“The shift to EMV is an expensive
project that places heavy demands
on employees’ time.”
But, Thornton adds that credit
unions don’t have to simultaneously
finalize two aspects to EMV deploy-
ment: ATMs and the cards them-
selves. MasterCard set an Oct. 1,
2016, counterfeit fraud liability shift
to the ATM acquirer, rather than the
card issuer, if a terminal can’t accept
EMV cards. The Visa shift comes
Oct. 1, 2017. That transition prom-
ises to be easier for credit unions
than the EMV card rollout.
“Regarding ATMs, the process
is pretty straightforward,” says
Thornton. “You need hardware and
software. The hardware isn’t a whole
machine but rather a plug-and-play
component. The software download
is simple and includes access to
all ATM networks, including Visa,
MasterCard, Discover, etc.”
Prioritize security during the
back-office integration of EMV
capabilities, Sloane advises:
“Security is going to be the focus
for 2016. Workflow and reporting
‘CUs had been waiting until
after the winter holidays
to commit to EMV.’
Michelle Thornton
49c u n a . o r g t F E B R U A R Y 2 0 1 6 t C R E D I T U N I O N M A G A Z I N E
© 2016 Credit Union National Association Inc. Reprinted with permission.

3. 50 C R E D I T U N I O N M A G A Z I N E u F E B R U A R Y 2 0 1 6 u n e w s . c u n a . o r g
requirements also will dictate the
velocity of back-office integration
projects.”
What’s working, what’s new
How quickly and intensely will EMV
catch on in the U.S.? Myer points to
the United Kingdom as an example:
EMV was introduced there 20 years
ago and now has a 95% merchant
penetration rate. And EMV now
represents 97% of card-present trans-
actions throughout Western Europe,
accoring to EMVCo—the consortium
that manages the EMV standard.
The primary holdouts are mom-
and-pop outfits or privately owned,
nontraditional stores that deal
almost exclusively with a local cli-
entele that prefers to deal in cash
or checks.
EMV’s arrival might change how
the U.S. financial industry asks for
card-user identification. “In the U.K.
and Canada, an EMV chip plus a
PIN is required for any credit or
debit card transaction,” Myer says.
“In the U.S., we associate PINs on
a credit card with taking cash out
of an account. So for now—at its
best—the ID standard with a U.S.
merchant is chip-plus-signature.
Given that a merchant doesn’t know
whether the handwriting on a cus-
tomer transaction is really the card
owner’s signature or a thief’s, the
level of security isn’t too high.”
Along with EMV’s already strong
antifraud features, Myer says card
issuers are beginning to offer their
own special security tweaks.
“Discover has already introduced a
smartphone app that allows a credit
or debit cardholder to suspend the
card if it is stolen or until the owner
finds it,” she says.
Can EMV transactions become
faster or even more secure? Sloane
believes those capabilities already
exist: “Near field communication
(NFC), commonly represented in
solutions such as Apple Pay, decreas-
es transaction time.” NFC enables
contactless communication between
devices, so consumers simply wave
their devices close to a POS device
to finish a purchase. The exchange
doesn’t require a direct card-to-
merchant POS device.
EMV can’t address one major
concern: preventing fraud in card-
not-present transactions, where a
seller can’t necessarily tell whether
a purchaser is using a stolen or
counterfeit card or data. Most ana-
lysts predict sizable growth in this
fraud category as more consumers
and merchants adopt EMV as their
primary card-present transactional
method.
“Card-not-present will indeed be
the next frontier in terms of height-
ened security,” Sloane says.
Resources
uCO-OP Financial Services:
co-opfs.org
uCPI Card Group:
cpicardgroup.com
uNewtek Business Services, a
CUNA Strategic Services alliance
provider: thesba.com
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‘We’ll soon see
all major retailers
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Docia Myer
T O O L S O F T H E T R A D E
© 2016 Credit Union National Association Inc. Reprinted with permission.