DES MOINES, Iowa (11/26/12)--Credit unions should perform their own cost-benefit analysis before implementing the Europay MasterCard Visa (EMV) card standard, a new white paper from The Members Group (TMG) recommends.
The paper, titled "The EMV Roadmap: Designing Your Financial Institution's Plan," describes how major card networks have announced their initial plans for EMV migration, each outlining how merchant and issuer integration will impact liability for fraudulent transactions. Some analysts speculate, however, the target dates outlined in these plans are likely to slip as networks become more aware of challenges facing merchants and their processors.
In designing their road map for migration, credit unions should first look at their average annual fraud losses, the paper said. Delaying the migration to EMV could increase fraud losses as a result of two situations: First, domestic card fraud is on the rise and predicted to continue as global EMV dominance drives fraudsters to the U.S.; and second, non-EMV cards will not meet the networks' standards for liability, thus shifting the responsibility for fraud to the credit union.
Next credit unions should compare anticipated fraud losses with the investment required by an upgrade to EMV, the paper advised. Given the cost-benefit analysis, does the migration to EMV cards make sound business sense? Be cognizant, however, that the answer to this question may change as EMV becomes more prevalent or as cardholders demand EMV cards, TMG warned.
Transaction volume is another consideration. EMV, many believe, is key to maintaining top-of wallet positioning, especially among certain cardholders. As card issuers field an increasing number of complaints about the ineffectiveness of magnetic-stripe cards overseas, the pressure to satisfy these cardholders grows, said the paper.
Improving acceptance internationally could also increase interchange income, TMG added.
The paper recommends that credit unions segment their card portfolios to determine which sections are best positioned for EMV. Large numbers of cardholders may travel more frequently than others. Keep in mind that not only Europe has migrated; Canada and Mexico are EMV-ready now.
To download the whitepaper, use the link.