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Frictionless Payments
Written by Cyndie Martini
on July 20, 2017

Two years ago, retailers across the country faced a deadline: On Oct. 1 of that year, they needed to have an EMV-capable payment terminal, or risk being stuck with the financial fallout of fraud. Meanwhile, other areas of heavy card use - like ATMs and gas pump terminals - had the benefit of extended deadlines.

Over the months that followed the deadline, more merchants have gotten onboard with EMV compliance, with 1.75 million Visa merchants accepting chip cards as of November 2016, according to Business Insider. That's just shy of 40 percent of retailers.

Now that merchants are becoming more compliant, it's another point of transaction that needs to make its move. The deadline for Visa ATM EMV compliance is quickly approaching: This liability shift is Oct. 1, 2017.

Credit unions should update ATMs soon

As the deadline looms, it's critical that credit unions make efforts to upgrade the ATMs in their network. While Oct. 1 marks a liability shift rather than a mandate - meaning it's not legally required - there could be serious repercussions for those who neglect to comply.

Beyond Oct. 1, if a consumer who has a chip-enabled card uses a non-EMV-compliant ATM and experiences fraud as a result, the ATM owner will be liable, ATM Atom explained. Currently, when this situation occurs, it's the card issuer that stands to take responsibility. However, if that consumer doesn't have a chip-enabled card, the card issuer will still be stuck with the bill.

The sooner credit unions make their ATMs compliant, the better. Doing so sooner rather than later allows time for mistakes or update setbacks to happen and be resolved, and still meet the deadline. For many ATM owners, particularly those who are in charge of older models, this could be a major concern.

Older ATMs may be more complex to adjust to become compliant. While some more recent models are primed and ready for the conversion - they simply need to be equipped with a chip reader - a dated version likely needs additional memory and a new motherboard, Digital Transactions pointed out.

Additionally, as Oct. 1 draws closer, more ATM owners will begin to make their moves. Upgrading an ATM can be a complex job, one best suited for a technician that's been trained in this area. These specialists' schedules will fill up fast, so for a credit union with the goal to be compliant before the liability shift, reaching out soon is likely the best option.

"Resources are going to get more and more scarce as we get closer and closer," David Tente, ATM Industry Association's executive director for the United States and Latin America, told Digital Transactions. "For those who haven't started or gotten far yet, there's only 'X' number of qualified people."

Reaching out to ATM-less consumers

When someone needs cash, they often turn to a favored ATM for a withdrawal. Perhaps it's in their network, they know it to be a safe location or maybe it's just conveniently placed. In any case, as the liability shift occurs, many consumers might be disappointed to find that their go-to ATM is no longer accessible.

As many as 42,000 independently operated ATMs will be taken offline as a direct result of the liability shift, reported. For some, the cost to upgrade might not be worth the investment. The Federal Reserve Bank of Atlanta anticipates the number of ATMs to shrink between 10 and 15 percent.

Credit unions have the opportunity to benefit frustrated consumers by offering them a secure location to withdraw cash. Additionally, for merchants who enjoy having an ATM at their location to benefit shoppers, the disappearance of this customer convenience may not be in their favor. This provides another opportunity for credit unions to explore new avenues and market to potential new members​.

ATM fraud is a bigger threat than ever

It's generally well-known among financial institutions that the purpose of the EMV shift is to reduce the occurrence of fraud. However, it's important to keep in mind that upgrading your ATM won't eliminate the chances of fraudulent activity.

Fraudsters who are savvy to payment industry trends know that the ATM EMV liability shift is coming up fast, and they're making their own preparations. For them, that means making the most of a shrinking window of opportunity, ATM Marketplace explained.

Fraud at ATMs increased 546 percent between 2014 and 2015, and more criminals are jumping on the bandwagon, according to a press release from FICO. In years past, crime is primarily contained within large metro areas on the coasts. But in 2015, it was clear that criminals across the country were targeting ATMs. And, they're not lingering at specific ATMs for as long before finding a new target. In 2014, the average ATM compromise lasted more than a month; in 2015, it only endured for two weeks.

"They are moving faster to make it harder for banks to react and shut down the compromises," TJ Horan, FICO's vice president of fraud solutions, said in a press release. "They are targeting non-bank ATMs, which are more vulnerable — in 2015, non-bank ATMs accounted for 60 percent of all compromises, up from 39 percent in 2014."

Switching an ATM to EMV soon may help reduce the chances of fraud occurring at the machine. Additionally, as more criminals move quickly to target ATMs, those that don't update could be at greater risk, not only for fraud occurring at their location, but also for feeling the effects of the liability shift soon after the deadline.

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