To EMV Or Wait And See

A shift in the secure payments standard is coming, but not every institution is ready to make the switch just yet.
Drew Grossman

Europay-Mastercard-Visa (EMV) chip cards have been the card payment standard in Europe and many parts of the world for well over a decade. Stateside adoption of this technology, however, is anything but widespread. EMV technology, which uses an embedded microprocessor to enhance security at the point-of-sale, presents a much-needed alterative to the easily compromised magnetic stripes that consumers in the United States have used for decades. Domestically speaking, EMV is still considered an emerging technology, but that’s about to change.

On October 1, 2015, new policies at Visa, MasterCard, and American Express will shift fraud liability from card issuers to merchants that don’t offer an EMV-enabled terminal for purchases, effectively making whichever party isn’t up-to-date on EMV bear the brunt of card present fraud losses. This liability shift is expected to have a significant impact on EMV availability and usage in the United States, yet not all institutions are scrambling to make the switch.


  • Digital Federal Credit Union
  • HQ: Marlborough, MA
  • Assets: $5.3B
  • Members: 406,689
  • 12-MO Share Growth: 9.34%
  • 12-MO Loan Growth: 9.05%
  • ROA: 1.39%
  • Credit Card Processor: VISA DPS
  • Debit Card Signature Processor: VISA DPS

At the end of 2014, Digital Federal Credit Union ($5.3B, Marlborough, MA) will start providing a new credit card that offers both a magnetic stripe and an EMV chip to members who travel abroad. This is the credit union’s first foray into EMV and is the first step in a rollout that will result in membershipwide chip and pin credit cards.

The only feedback we’ve gotten on the EMV cards is from members who are travelers, says Julie Moran, vice president of support services at Digital.

This is not uncommon. International travelers are often the first Americans that need EMV cards, and credit unions with a membership that spends time abroad might benefit from responding to EMV quicker. Other credit unions are making the switch early on to get ahead of the compliance burden, to be a pioneer in payments technology, or to increase member confidence in security.

So why are some institutions choosing instead to wait?

The most common answer is cost. The investment to convert to EMV cards will vary depending on the size of the credit union and the number of cards it must reissue. Additionally, there are back-office costs and equipment updates as well as marketing and member education campaigns to consider all of which add up quickly.

The cost of the [EMV] card is double. Then you have your initial startup costs because there are a lot of processes you have to change with your different vendors to get ready.

The cost of the card is double, Moran says. Then you have your initial startup costs because there are a lot of processes you have to change with your different vendors to get ready. We’re getting a handle on all that now. We don’t have an estimate, but the expense is there.


  • Firefighters Community Credit Union
  • HQ: Cleveland, OH
  • Assets: $196M
  • Members: 27,738
  • 12-MO Share Growth: 6.75%
  • 12-MO Loan Growth: 10.35%
  • ROA: 0.18%
  • Credit Card Processor: PSCU
  • Debit Card Signature Processor: JHA Payment Processing Solutions
  • Debit Card Pin Processor: Vantiv

And smaller institutions that don’t have the same economies of scale as this $5 billion institution will likely pay much more per card to switch over. For example, Firefighters Community Credit Union ($196M, Cleveland, OH) is planning to issue 5,400 credit cards with EMV capability as part of a mass reissue to all membership by May 1, 2014.

We’re paying approximately $4 additional per EMV card, says Ben Laurendeau, the credit union’s CEO. That may be higher than some institutions based on the low card count.

To cover the additional expense of supporting this technology, some institutions are counting on the savings in card present fraud the more secure EMV option promises, Laurendeau says. Digital, on the other hand, doesn’t expect a significant return on reduced fraud because, according to Moran, card present fraud isn’t as big a concern for the credit union as other threats such as online card fraud and card data breaches. Still, the institution views the transition to EMV as a necessary change all credit unions will eventually undertake.

I don’t think credit unions are holding off for any reason other than to make sure they have a plan in place regarding the cost and how they are going to reissue, Moran says. With the liability shift, it’s really the same to us as issuers because the burden for fraud is still on us. There will only be a benefit [to adopting early] but if we wait, there isn’t a penalty.

For some, waiting is a smart choice because it allows the market to settle down after card companies and other driving parties make their changes. For Laurendeau and Firefighters Community, staying on top of these shifting standards has been a challenge.

We’re trying to learn about something that is kind of a moving target, Laurendeau says. That’s one of the downsides of being on the front end of this. If we were into the middle of 2015, it would be more established and we wouldn’t have the pains of being on the front end of the process.

These points of pain will continue when it comes time to implement EMV for debit cards, which promises to be more complicated than a straightforward credit card conversion. And until the rules and requirements for debit are clearer, most institutions will likely hold off on that investment.

Change is coming, and the payments technologies already on the horizon aren’t likely to fully mature before October 2015. Mobile and contactless payments might play a role in the future of the business, but EMV is the now. And staying in the past is not an option.

April 11, 2014

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