Consumers should expect some ATM changes as the next wave of EMV migration takes place
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By now, as part of the card industry’s change from old magnetic stripes to new computer chips, most American consumers have chip-bearing cards and have seen merchants install chip-reading payment terminals at stores.
ATM owners, like merchants before them, face deadlines to change to fraud-fighting, chip-reading cards that meet the international EMV standards. Unlike merchants, who faced a single deadline in 2015, the deadlines for ATM switching will be staggered.
The merchant fraud liability shift deadline date was Oct. 1, 2015, to encourage retailers to migrate to EMV chip cards. ATM owners face a Visa deadline of Oct. 1, 2017, but MasterCard’s is just around the corner on Oct. 1, 2016. As of those dates, some liability for fraudulent transactions will shift from banks to the ATM owners who haven’t made the switch.
The 75 percent of Americans who are ATM users should expect four major changes as this next wave of EMV migration takes place:
- ATMs will become scarcer, as some of the smaller operators will decide not to undergo the expense of making the change.
- The terminals themselves will be altered to accept chip cards.
- The procedure for getting cash will change.
- On-screen prompts will give new choices.
“Realize that even if you have used a particular ATM every week for the past five years, this time it might be different,” said Jamie Topolski, director of alternative payment strategies for Fiserv, a U.S. provider of financial services technology, and vice chair of the EMV Migration Forum, a payments industry group. “Especially during the transition, the prompts and steps might change as the owner modifies the software and improves the experience.”
Costs encourage early switch
You may have already seen new terminals at big banks, which are already well along the way in making the transition. Progress is much spottier for smaller ATM operators.
Banks and card payment networks are spurring the change by shifting liability for the cost of card-present fraud. If an ATM cannot process a MasterCard EMV chip card after Oct. 1, 2016, the ATM owner will be responsible for the chargeback costs of any fraud that occurs as a result of the nonchip secured transaction.
Though Visa’s shift date is more than a year away, consumers should expect ATM upgrades will come sooner rather than later.
“I would think that ATM owners are trying to probably hit Visa and MasterCard at the same time to keep things simple and keep costs low,” Topolski said. “I’m guessing they would get both done to prior to Oct. 1, 2016.”
Physical terminal changes
Just as cardholders learn to dip their chip cards instead of swipe at many retailers, that adjustment will have to be made at ATMs, too. EMV-compliant ATMs will still be able to read magnetic stripe cards, but they will also have to accept a card that allows chip processing.
Realize that even if you have used a particular ATM every week for the past five years, this time it might be different.
|\u2014 Jamie Topolski|
Fiserv, EMV Migration Forum
There are currently two main types of ATM chip card readers: Tractor feed machines and dip insert machines. Tractor feeds refers to the type of machine that pulls inserted cards into the ATM for processing. When an ATM with this type of card reader is upgraded to EMV compliance, users won’t notice a physical change because the chip reading process will still take place inside the terminal.
Dip-insert card readers on gas station pumps for pay-at-the-pump transactions have been reading cards via a quick insert in-and-out for years. For ATMs that either upgrade to dip-insert machines or update their existing dip insert machine to process chip cards, ATM users may notice some changes to how exactly those cards are dipped.
After a dip insert ATM card reader is upgraded, there are two ways EMV cards can be processed. In some instances, the dip insert reader may act as a “card grabber.”
“You slip the card in and it grabs it and holds it,” Topolski said. This type of card reader is not very common as it can create a tug of war between the cardholder and the card and damage the card.
Jack Jania, senior vice president of strategic alliances for financial services group Gemalto North America, thinks dip insert readers that require consumers to dip their cards twice and wait will be a common replacement for swipe-based ATMs. With these card readers, the ATM user will have to quickly dip his or her card to allow the machine to detect if the card has a chip or not. If it does, it will prompt the cardholder to reinsert the chip card and keep it in the machine until the transaction is complete.
For those who aren’t used to waiting for a chip card to process, leaving the card in the ATM could create some confusion and even left-behind cards, as it did for Catherine Murchie, MasterCard’s senior vice president of processing, enterprise security and network solutions, when she first used a chip card at an ATM.
“I drove away and left my card in the terminal,” she said. “There was no indication to take it out. I was so used to dipping it in, taking it out and going about my business.”
On-screen prompt changes
Once consumers figure out how to insert a chip card into an upgraded ATM, they might also have to navigate new on-screen prompts to complete a transaction.
So far, Topolski is aware of two possible changes. “When consumers use their new ATM debit cards, they may be prompted to pick between two choices – Visa debit or U.S. debit, or MasterCard and Cirrus debit,” he said. “There are two options available on U.S. debit cards, so that merchants have the ability to route transactions to two or more networks.”
This selection process is usually something ATMs do internally, so the prompt can be confusing to ATM users who’ve never seen it. However, ATM users can select either option and still be able to proceed with their transaction, according to Topolski. “Eventually the software will be upgraded and that prompt will go away,” he said.
Another change may prevent some ATM users from completing their transactions. “The language selection prompt has gone away in some cases,” Topolski said. Since the language selection step on ATMs corresponds to the software, if a terminal’s software is upgraded and this step is not included, the prompt will not show up.
If the language prompt disappears and a consumer has no choice but to continue in English, “That can cause some confusion, especially if it isn’t your first language,” he said. Further software upgrades should fix this issue.
Big banks comply, some small fry to disappear
These days, ATM owners – banks, small independent owners and large independent ATM networks – are at different stages of the EMV migration process.
MasterCard’s Murchie estimates that approximately 25 percent of ATMs in the U.S. are chip-card-ready, and most major banks are nearly finished with their ATM terminal migration, too. An informal poll of seven major debit card-issuing banks – PNC Bank, Bank of America, Navy Federal Credit Union, Wells Fargo, Chase, Pentagon Federal Credit Union and U.S. Bank – confirmed this.
[M]any of the small and mid-sized operators, especially those owned by nonfinancial institutions, will not and will be faced with absorbing the loss of transactions made with counterfeit cards – a fraud loss they haven’t experienced in the past.
|\u2014 Retail Payments Risk Forum|
In fact, many transitions are well underway. For example, according to Chase spokesman Michael Fusco, “The majority of our 18,000 ATMs have been upgraded to accept EMV cards and process EMV transactions.”
All Wells Fargo ATMs have been equipped to process chip cards since late 2014. The majority of Bank of America ATMs are also compliant and the remaining terminals will be updated before the end of this year, according to spokeswoman Betty Riess.
However, small ATM operators who own a handful of terminals in places such as convenience stores and gas stations will not be as aggressive with their move to EMV compliance, according to Topolski.
For ATMs that don’t get a lot of use, “Going through the process of upgrading just isn’t worth it,” he said. “Now that the liability shift is coming, some of those ATM owners may just disable their machines rather than take on that risk.”
Topolski expects a large number of independent ATMs will be taken offline instead of migrating. Based on industry estimates, “There might be a 15 percent contraction of ATMs, which means that about 42,000 ATMs might be eliminated over the next couple of years,” he said.
The Retail Payments Risk Forum from the Federal Reserve Bank of Atlanta, predicts a 10 to 15 percent decline in the base number of ATMs in the U.S. “because of financial institution mergers and the cost of EMV upgrades … [M]any of the small and mid-sized operators, especially those owned by nonfinancial institutions, will not and will be faced with absorbing the loss of transactions made with counterfeit cards – a fraud loss they haven’t experienced in the past.”
And while consumers may notice some ATMs disappearing, others may stick around but never be EMV-compliant.
“There is a certain subset of merchants who will never upgrade their terminals because the risk of fraud chargebacks are so low,” Jania said. “Independent ATM operators are only in business to make money off the ATM and if the return on investment doesn’t make sense, they will never move.”
Patience will be key
Just as consumers getting used to EMV chip cards in stores have been advised, patience will be important as ATM owners and banks migrate to the new technology standard. For now, be aware of the various prompts and procedural changes you might experience at an ATM and know that the glitches should disappear with time.
“The approach in the market has been get the terminals in and then optimize them for a good customer experience,” MasterCard’s Murchie said. “The struggles won’t be long-term.”