emv: the race is on! - cuna councils€¦ · emv: the race is on! september 24, 2013 leanne phelps...
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EMV: The Race Is On! September 24, 2013
Leanne Phelps
Senior Vice President, Card Services
State Employees’ Credit Union
Bill Thomas
Vice President, Member Operations
United Nations Federal Credit Union
Agenda
• Why EMV?
• EMV: The Technology
• UNFCU Case Study: The Issuer Perspective
• SECU Case Study: The Issuer Perspective
Why EMV?
• Secure chip stores payment information
• Chip card authentication prevents
counterfeiting
• Adds cardholder verification methods
• Offers online or offline authorization
EMV by the Numbers
• Worldwide Adoption
– 1.5 million payment cards
– 20 million POS terminals
– 40% of cards and 70% of terminals are EMV
• U.S. Adoption – What it will mean financially
– 15 million point-of-sale devices = $6.75 billion
– 360,000 ATMs = $500 million
– 609.8 million credit cards & 520 million debit cards = $1.4
billion
– Cost of mag-stripe card = 15 cents vs. EMV card = $2 - $4
EMV by the Numbers
Canada’s experience:
•45 percent of terminals were upgraded for
EMV through conversion kits
•50 percent of terminals were replaced; and
•5 percent of terminals were retired
Source: ATM Marketplace, July 3,2013
EMV by the Numbers
If we use these same percentages in the U.S., retail
ATM EMV conversion will look like this:
•135,000 + ATMs will be upgraded via kits installed by
field technicians;
•150,000+ new ATMs will be purchased and installed;
•The 150,000 ATMs being replaced will be returned to
manufacturers as trade-ins; and
•15,000 + ATMs will be retired as uneconomical.
All by 2017, at the latest!
Key EMV dates from Canada’s
Experience
7© 2012 VeriFone Systems, Inc.
Fraud Migrates to U.S.
8
41.1% of cards
76.7% of terminals
84.4% of cards
94.4% of terminals
20.6% of cards
75.9% of terminals
28.2% of cards
51.4% of terminals
14.5% of cards
68.1% of terminals
Fraud Reduction Stats:
UK Example
• Fraud on debit and credit cards fell by
more than 25% from 2008 to 2010
• Counterfeit card fraud —skimming and
cloning—fell by over half
• Fraud on lost and stolen cards is at their
lowest levels in 10 years
• Fraud migrates to CNP9
Source: The UK Card Association
Form Factors Options• Contact
– Chip is embedded in a card
– A contact card is inserted into a smart card reader
– The contact points on the chip make contact with
the card reader
• Contactless
– The chip may be embedded in cards, key fobs,
stickers, mobile phones, etc.
– A contactless chip requires close proximity to a
reader (“tap and go”)
– Both the chip and the reader have an antenna and they
use an RF (radio frequency) signal to communicate
The Value Of The Chip
Source: Smart Card Alliance - What are chip enabled payment cards?
EMV Authentication and Verification
Source: Smart Card Alliance - What are chip enabled payment cards?
Authorization Options
Source: Smart Card Alliance - What are chip enabled payment cards?
Cardholder Verification Options
Source: Smart Card Alliance - What are chip enabled payment cards?
Chip and PIN
Source: Smart Card Alliance - What are chip enabled payment cards?
US Issuers Options
Source: Smart Card Alliance - What are chip enabled payment cards?
Key EMV dates from Card Brands
17© 2012 VeriFone Systems, Inc.
“Liability Shift” will Drive
Adoption
• A non-compliant merchant is
liable for fraud that occurs on
any chip card used on a
magnetic swipe terminal.
• A non-compliant issuer is
liable for fraud that occurs on
any magnetic stripe card used
on a chip card-enabled
terminal.
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EMV Case Study
United Nations Federal Credit Union
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About UNFCU
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• Serves employees of the United Nations and their
family members world-wide
• 2 Branches, 4 Representative Offices
• $1.4 billion in assets
• 101,895 members
• 11 ATMs
-Figures as of 7/31/13
UNFCU Card Programs
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• Credit and Debit Processed by FDR through The
Members Group
• Visa Elite (EMV)- 9,100 cards issued
• Visa Azure (EMV)- 1,200+ cards issued
• Visa Gold (phasing out with Visa Azure)- 22,000
cards issued
• Visa Classic- 9,600 cards issued
• Mastercard Debit- 75,000 cards issued
-Figures as of 6/30/13
UNFCU Migration to Chip –
Why Then? (2010)
• International balances were falling
• Members experienced declines at off-line terminals
• Members reported frustration and uncertainty when
using cards abroad
• Increasing fraud
UNFCU’s Approach
• Started by looking for a partner- that was a major hurdle!
• Focused on a small yet lucrative portfolio for
replacement- Visa Platinum
• “Big bang” approach- after pilot program, replaced all
Platinum Cards (over 5,000) within a few weeks
• Members had sixty days to activate cards
• Had to accommodate chip and signature transactions
due to geographically diverse member base
UNFCU’s Approach
• Major Challenges
– Finding willing partners
– Visa certification
– Address mapping for international members
– Delivery in unstable or fraud-prone countries
– Member activation of cards
– Member and staff education
UNFCU’s Approach
• Major Successes
– Average Balances increased significantly (more than
4 x what we saw on Gold portfolio)
– Fraud was reduced in absolute terms even as
portfolio balance increased
UNFCU’s Chip rollout
Then- 11 months
Planning
Development
Training
Testing &Certification
Pilot Launch
Mass Reissue
UNFCU’s Chip rollout
Now- 4 months
Planning
Development
Training
Testing &Certification
Launch
UNFCU Visa Azure Launch
What’s Next at UNFCU?
• Work with FDR and Gemalto to migrate debit portfolio
• How to support Durbin Dual Routing Requirements –
Common App ID – Visa or MasterCard options
EMV Case Study
State Employees’ Credit Union
About State Employees’
Credit Union
• Non-profit financial cooperative serving state
employees, teachers and their family members in
North Carolina
• 1.8 million members
• 250 branch offices
• 1,100 ATMs
SECU Card Programs
• Debit Portfolio - Route through Visa DPS to SECU Host
– 50,000 Cash Points Global Cards
– 1.1 million Visa Check Cards
– $5 billion annual purchase volume
– 160 million transactions
• Credit Portfolio – Processed through First Data Resources
– 250,000 Visa credit cards
– $550 M Open credit lines
– 11 million transactions
SECU Migration to Chip – Why
2010?
• Problem-free acceptance for our members
• International operability
• Begin migration to dynamic data transaction
processing in a real time environment
• Counterfeit is our biggest challenge
• U.S. is a prime target and will only worsen as Canada
and Mexico implement EMV
• Fraudsters’ technology continues to be refined
SECU’s Approach• Learned the lingo - talked to vendors and industry experts and then
talked some more!
• Online versus offline is not what it used to be
• Phased approach
– Reissue all SECU debit cards as Chip-enabled
– Eliminate acceptance issues for our members internationally
– Credit to be reissued as chip
• Project timeline
– May 2010 – began vendor discussions
– December 2010 – employee pilots
– December – 2011 – completed mass reissue
SECU’s Chip and PIN rollout
• SECU utilizes Visa Chip Services
– Visa authenticates the cryptogram from the chip and passes
the results to SECU
• Program supports chip and online PIN or chip and signature
– When SECU card is presented at a chip-enabled terminal,
the card will be authenticated through the chip
– Cardholder can be authenticated with a signature or PIN
depending upon merchant capability
– Will not work at unattended terminals outside US if offline
PIN support is required
• Cards continue to have mag stripe for use at non-chip terminals
Let the Real Challenges
Begin!
• Chip transaction activity begins in North Carolina July
2011!
• Merchant Acceptance Issues
• Don’t assume anything!
• Allow ample testing windows
In Their Own Words: Member Feedback
• “This card was perfect, I have been to Ireland and other countries
before and always had trouble, not this time! My traveling colleagues
still had trouble with their magnetic stripe cards. Thank you! “
• “Had a surprisingly good experience. First time experience. We need to
use same technology here in the USA!”
• “It is reassuring to know that I have the latest technology in my debit
card and that it will work with ease at most international locations.
When one is thousands of miles from home, it’s important that his card
match the advanced procedures in use in foreign countries. I
congratulate SECU for being one of the first financial institutions in the
U.S. to provide the debit/CPG card. P.S. I have never used this card in
the U.S.”
• “This was very efficient, all retailers knew & were able to do
transactions. Would use again!”
What’s Next at SECU?
• Work with FDR and Oberthur to migrate credit portfolio
• ATM upgrades –install/enable chip readers
• Upgrade ATM application software
• Host changes for EMV support from our ATM network
• Visa DPS upgrades to support acquiring transaction
activity
• How to support Durbin Dual Routing Requirements –
Common App ID – Visa or MasterCard options
Project Team
• Visa
– Provided international expertise and project resources
– VisaNet changes
– Certification Testing
– Chip profile tool
• Visa DPS
– Provides SECU transaction switch services
– Project management for overall project
– ISO changes for additional data elements
Project Team (cont’d)
• Oberthur Technologies
– SECU debit card personalization services
– Experience in chip technology in international markets
– Provided plastics and chip production
• CV Systems
– Host vendor for transaction processing software
• SECU Project Team
– Business Users
– Host programmers
– Marketing
Member Education
• Advisory Boards
• Employee education
• Newsletter articles
• Insert with card mailings
• Updates to card carriers
Points to Remember
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EMV is a standard that dictates the interaction between a smart
(chip) “card” and a POS payment device
The “chip” stores encryption data that is used during the
transaction to prove the card is authentic; it prevents cloning
EMV chips can be either contact or contactless and are read &
write capable
The Card Brands have announced EMV incentives (carrots and
sticks) that encourage issuers, acquirers, and merchants to adopt
EMV
EMV Benefits All Parties
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BENEFITS
C A R D H O L D E R
• Peace of Mind (fraud reduction)
• Never lose sight of their card
• Global interoperability
• Fewer fraud-related chargebacks due to
stolen cards/skimming
• Increase in international customer
satisfaction
M E R C H A N T
I S S U E R• Fraud reduction
• Global interoperability
• Mobile payments facilitation
Your EMV Call to Action:
Don’t Wait!
• Read and research to keep up with trends
– http://www.smartcardalliance.org/
– http://www.emvco.com/
• Talk to your core processor: Are they ready to issue?
• Consider using “on behalf of” services from Visa and
MasterCard
• Network with others
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Thank You!
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