IAACU, Innovation and Chip-Based Cards
EMV or “chip-based” credit card technology has been in the press recently prompting questions such as:
“What is it?” “Is it safe?” and “When will we get it?”
I was pleased to hear some of our members express surprise that we do not already have it because they think of us as an innovative institution. While it is true that our strategy is to embrace innovation, we need to balance innovation with financial strength and member value.
“EMV” gets its name from the companies Europay, MasterCard, and Visa that worked together to develop it. The technology is meant to be a global standard that covers the processing of credit and debit card payments using a card that contains a microprocessor chip at a payment terminal. Unlike magnetic stripe (current technology) transactions, where typically only the card number and expiration date is processed, every chip card transaction contains dozens of pieces of information. This makes the card much more secure with regard to fraud at the point of sale when the card is presented.
This seems like a very good thing for both IAACU and our members right? Cutting card fraud directly cuts our expenses and increases our ability to give more back to our members. So why haven’t we adopted EMV cards? There are four factors keeping IAACU on the sidelines: cost, limited merchant (point of sale) acceptance, limited fraud prevention, and limited shelf life.
The first two factors represent increased costs with no guaranteed return. These cards are expensive (five times the cost of our current cards) and we would need to reissue our entire portfolio of several thousand cards. In addition, merchants would need to purchase new high dollar card readers, so they’re waiting too.
The last two factors represent an unknown future. The type of fraud that is prevented by this technology is when the card is actually presented at a point of sale. “Card not present fraud”, such as on ecommerce websites is not prevented by EMV technology. This technology was created to address “card present at point of sale” fraud 15 years ago in Europe. Think about what else has happened in the past 15 years – specifically smartphones and applications such as Google Wallet. With technologies such as Google Wallet and other innovations EMV may soon be antiquated technology.
IAACU will continue to monitor these technologies and implement when and if it is clearly advantageous for our members. We are committed to innovation balanced with financial strength and member well-being. Please don’t hesitate to let us know how we can better serve you and thank you for your continued support!Tags: chip, credit card, emv, fraud