Picture this: A member pulls into the airport after sitting in traffic for hours. They’re running late so they park at the airport, which will cost between $10 and $15 a day. They forget to take off their belt while passing through security, get a full body search, and watch while their carry-on is prodded because of a four oz. bottle of lotion. Finally, they escape the clutches of airport personnel and take off toward the gate, their carry-on bumping along behind them. They slip onto the plane just in time to sit in between a crying baby and a sneezing, coughing teenager.
When they land in France, they hustle off the plane, gasping for clean air, and head down the terminal to buy their train ticket. Jet lagged mind swimming with visions of a four star hotel and aching for a night of much-needed rest, they stick their credit card into the machine to pay the $10 fare.
DECLINED. They try again. DECLINED.
It’s a POS terminal that only accepts EMV chip card technology and declines the member’s magnetic stripe card. A breakdown ensues.
As a credit union, what can you do to avoid this happening to members?
In January 2012, more than two million North Americans traveled internationally to countries that have adopted EMV technology, according to a report by the Office of Travel and Tourism Industries.
Approximately 80 countries are currently in some stage of Europay-Mastcard-Visa (EMV) chip migration. As of 1Q 11, 1.2 billion chip cards have been issued globally and 18.7 million POS terminals currently accept EMV, according to EMVCo, the company that defines and manages these advanced standards.
EMV allows consumers to use microprocessor technology embedded in the card along with their signature or a PIN number for more dynamic authentication. EMV chips are a critical stepping stone in many evolving contactless payments systems, including mobile wallets.
Unfortunately, the U.S. has been trailing other countries on EMV technology, says Merrill Halpern, assistant vice president of card services at United Nations Federal Credit Union ($3.6B, Long Island City, NY). “Most U.S. consumers have been in the dark on this,” he says.
United Nations was the first issuer of EMV in the U.S. and began rolling out its chip-and-pin cards to some membership segments at the end of 2010. Halpern says the move was a necessity for United Nations because of its large traveling membership base. In many countries, United Nation’s members with magnetic stripe cards were being declined at EMV-enabled POS terminals.
“We were relentless in issuing EMV because we didn’t want to give up on our international members,” Halpern says.
The typical cost of magnetic stripe cards is around 15 cents, whereas the average cost of chip-enabled cards is between $2 and $4, according to a white paper report by First Data.
EMV has not only granted United Nations members a stress-free international purchase experience, it has also helped the credit union address fraud prevention in a more palpable way.
An estimated $8.6 billion per year is spent by the U.S. card payments industry because of card fraud, according to a 2010 Aite Group report. “Credit unions have to look at EMV in terms of fraud prevention,” Halpern says.