By Robin Arnfield | Contributing writer, ATM Marketplace
sponsored by National Cash Systems
MasterCard’s October 2016 deadline for U.S. ATM deployers to upgrade their ATM fleet to EMV has now passed, and Visa and the other card networks’ October 2017 deadline is looming.
This white paper explains the EMV upgrade financing options available to ATM deployers
from Irvine, California-based ATM services company National Cash Systems. These options are designed to ensure ATM deployers can quickly, easily and cost-effectively comply with MasterCard’s and Visa’s EMV migration requirements.
Fraud liability shift
The U.S. is introducing EMV chip cards and EMV technology at POS terminals and ATMs to prevent card-skimming and counterfeiting.
Since October 2016, when MasterCard instituted a fraud liability shift for U.S. ATMs which aren’t EMVcompliant, ATM deployers who aren’t EMV-ready could face much higher costs. The situation will become even more critical when Visa and the other card networks impose a fraud liability shift on U.S. ATM deployers in October 2017.
Currently, EMV cards still include mag-stripes – as well as an EMV chip – for use at ATMs
and POS terminals that aren’t EMV-capable.
The fraud liability shift means that, if an ATM deployer can only process mag-stripe cards
and an EMV card is used fraudulently at one of their ATMs, they are liable for the issuer’s
Conversely, if an ATM is EMV-compliant and a mag-stripe-only card is used at the
terminal, the issuer, having failed to migrate to EMV, is liable for the fraud.
Unfortunately for ATM deployers who have yet to upgrade to EMV, the card networks
have refused to alter their liability shift deadlines. So ATM operators who haven’t migrated
to EMV will be targeted by fraudsters and their ever-smaller and more sophisticated
According to ATM Marketplace, most industry experts predict that ATM fraud attacks
will rise as the U.S. converts to the EMV standard and thieves rush to make the most of
pilfered card data.
Criminals are aware the window of opportunity to skim mag-stripe cards at U.S. ATMs is closing.
In April 2016, FICO Card Alert Service, which monitors hundreds of thousands of U.S. ATMs, reported that fraud at ATMs increased nearly six-fold between 2014 and 2015. Of this, 60 percent occurred at retail ATMs, compared with 39 percent in 2014, FICO said.
“From October 2016, any ATM deployers who aren’t EMV-ready and process a fraudulent transaction involving an EMV card will face much higher costs,” said Judi Suzuki, National Cash Systems’ President. “The cost of the fraud will fall back on the ATM deployer because they failed to migrate to EMV. So avoid liability costs and don’t become another target, when we already have the solution. Staying ahead of the game by being EMV-compliant will be more beneficial and cost effective for ATM deployers and customers at the end of the day.”
Lack of readiness for EMV
“The ATMIA’s EMV Readiness Survey results released in March 2016 indicated that 58
percent of ATM operators (FI and independent) would have the majority of their ATMs
upgraded and accepting EMV transactions by the end of 2016,” the ATMIA’s September/
October 2016 USA Region e-newsletter noted. “But that still leaves 42 percent with a
majority of their fleet that isn’t ready. If you find yourself in the latter category, it’s important to do as much as you can, as quickly as you can. Try to prioritize upgrading those terminals with the greatest volume and the most fraud.”
An October 2016 atmAToM blog by Darryl Cornell, president and CEO of ATM vendor Triton Systems said that, “reportedly U.S. banks and credit unions were 80 plus percent complete in their EMV upgrades (as of mid-October 2016). While ISOs are actively moving, estimates are that fewer than 50 percent of all retail ISO ATMs had been upgraded and activated as of mid-October 2016…Merchants remain the biggest challenge, as fewer than 20 percent of merchant-owned ATMs are estimated to have been upgraded and activated for EMV.”
Dire financial consequences of not upgrading
According to “What is Risk Mitigation? – EMV Chip Liability Shift,” an atmAToM blog by
Jack Milford, an attorney specializing in the ATM industry, failing to prepare for the EMV
liability shift means that “many ISOs are potentially on the precipice of financial ruin
because of their unsuccessful or lack of risk mitigation.”
“I’m surprised and perplexed that so many smart and savvy ATM ISOs in the U.S. have
not (or if so, very belatedly) turned their full attention to eliminate, reduce or minimize
the potentially devastating financial liability they face due to the networks’ looming
EMV counterfeit liability shift (CFLS) chargebacks,” Milford wrote. “I believe many ISOs
have either underestimated, or not accurately defined, or clearly don’t understand
the catastrophic financial liability the CFSL chargebacks will bring to bear on their
companies if they are hit with chargebacks. These CFSL chargebacks are going to be
in the thousands of dollars! Potentially, wave after wave of such chargebacks once the
fraudsters pick up momentum.”
National Cash Systems
National Cash Systems says that it is “ready, willing and able to help ATM operators get
ahead of the change and make the transition to EMV compliance.”
“Don’t run the risk of delays in EMV migration caused by forces outside your control
such as device manufacturers’ equipment inventory or delivery schedules, software
compatibility, or outside consultants’ availability,” National Cash Systems’ Suzuki said.
“Call us today at 888.642.2274 for a free evaluation of your EMV readiness!”
Over the last year, National Cash Systems has regularly contacted its merchant customers
to warn them about the October 2016 liability shift.
Where ATM deployers have categorically refused to upgrade to EMV, National Cash
Systems’ policy is to get them to sign a waiver saying that National Cash Systems has
advised them of the liability shift. This waiver also states that they take responsibility for
the cost of any fraud resulting from their decision not to migrate to EMV.
If any of National Cash Systems’ merchant clients fail to respond to its EMV notifications
or decline to sign the waiver, then the ultimate sanction for National Cash Systems could
be shutting these non-EMV-compliant merchants off its network, Suzuki warns.
This is what happened to non-EMV-compliant ATMs in Canada after the country migrated
to EMV in 2012. In an atmAToM.com blog, Triton’s Cornell wrote that about 1,000 noncompliant ATMs were disconnected in December 2012.
Being disconnected would cost an ATM owner not just transaction surcharge revenue
but also incremental revenue from the spending in their stores by people who come in to
withdraw cash from their ATM. According to statistics on National Cash Systems’ website:
• ATM customers spend more: ATM users spend 20-25 percent more in convenience
• ATM users visit frequently: 40 percent use an ATM 8-10 times a month.
• High traffic: the average ATM is used 300 times per month.
• Popular stop: 60 percent of Americans aged 25-34, and 51 percent aged 35-49,
withdraw $40.00 about eight to 10 times per month.
“People generally spend a percentage of the cash they withdraw at an ATM inside the
store,” said Suzuki. “So, if people are afraid to use an ATM as it hasn’t been upgraded to
EMV, then the merchant will lose surcharge revenue and also incremental spending in their store from cash withdrawn at their ATM.”
National Cash Systems has put together a set of attractive options to help ATM deployers
easily and cost-effectively migrate to EMV.
For clients for whom cost is a factor, National Cash Systems can turn their ATMs into a
placement that National Cash Systems owns.
“For merchants who own their own ATMs and load their own cash, but don’t want to buy
an EMV upgrade kit or a new EMV-compliant ATM, we can look at their ATMs’ transaction volume,” said Suzuki. “If they handle significantly high transaction volumes, we can turn their ATM into a placement. We place a new ATM for them for free which we own. However, the profit distribution changes, as, out of a $3 transaction fee, for example, we would give them 50 percent – $1.50 – instead of their retaining the whole $3 surcharge.”
National Cash Systems also has a financing plan for ATM owners. “We can front the cost
of the EMV upgrade kit and keep 100 percent of the surcharge fees from the ATM until
we reach $800,” said Suzuki. “This works out at 800 transactions at $1 per transaction, after which the client reverts to their original profit distribution. The cost to a client of our
upgrade kit and labor is $679. But, if we finance the upgrade, we think $800 should cover our expenses from financing it.”
If an ATM isn’t upgradeable and the client would need to buy a new or used EMV compliant ATM, they would be paying $1,200-$2,500, Suzuki said. “We can finance the ATM purchase over a couple of months, with the client retaining ownership, or we can turn this into a placement if there is a high enough transaction volume,” she said. “We have a three-month finance deal for the financing plan option, but can go up to six months in special cases.”
If you are interested in more information on EMV kits or upgrading to an EMV compliant ATM, contact us today for assistance at 949.417.5000, or fill out the form to the right and a National Cash Customer Service Representative will contact you.