EMV: The Race Is On! September 24, 2013 Bill Thomas Vice President, Member Operations United Nations Federal Credit Union Leanne Phelps Senior Vice President, Card Services State Employees 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
Worldwide Adoption EMV by the Numbers 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. 84.4% of cards 94.4% of terminals 14.5% of cards 68.1% of terminals 41.1% of cards 76.7% of terminals 20.6% of cards 75.9% of terminals 28.2% of cards 51.4% of terminals 8
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 Source: The UK Card Association Fraud migrates to CNP 9
Contact Form Factors Options 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. 18
EMV Case Study United Nations Federal Credit Union 19
About UNFCU 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 20
UNFCU Card Programs 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 21
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 UNFCU Visa Azure Launch Planning Development Training Testing & Certification 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 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 41
EMV Benefits All Parties M E R C H A N T Fewer fraud-related chargebacks due to stolen cards/skimming Increase in international customer satisfaction I S S U E R Fraud reduction Global interoperability Mobile payments facilitation BENEFITS C A R D H O L D E R Peace of Mind (fraud reduction) Never lose sight of their card Global interoperability 42
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 43
44 Thank You!