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The importance of EMV for ATMs, post-liability shift

EMV at ATMs will become very important starting October 2016.

One of the most significant factors for ATMs in the coming weeks is EMV. Since October 2015, MasterCard and Visa, the companies primarily responsible for the smart chip standard, now hold non-EMV operators liable for any fraudulent activity. As a result, there is a greater investment on the part of banks to incorporate this technology into their equipment, according to an industry white paper. However, independent operators may feel less inclined to switch, if only because the cost of upgrading the equipment to meet the standard if not getting a replacement dispenser supposedly outweighs the benefits of switching. Before jumping to that conclusion, it may be wise for businesses, especially retailers, to consider the situation and what options they have.

ATM operators should consider the risks of EMV noncompliance over short-term pain

Technically speaking, by no means is a store owner required to incorporate EMV technology into any of their equipment. That includes point-of-sale terminals and any payment machinery. However, the liability shift, which will occur for ATMs on Oct. 1, 2016, practically makes it a necessity. If a criminal or unscrupulous individual makes a payment using a fraudulent card with a magnetic stripe and no EMV-compliant equipment is on the premises, the business must cover the loss itself. This shift incentivizes retailers to make the switch, but that may not compel them to replace or upgrade everything such as their cash dispensers.

The primary concern for stores that operate ATMs independently is the matter of cost. Lender Super G Funding, citing data from the Aite Group, guesses the price range for making a dispenser EMV-compliant is between $2,000 and $4,000. For medium-sized and larger retailers, it's an annoying cost but absorbable. Smaller businesses may feel a huge pinch in switching over, however.

Still, the uncertainty of non-compliance is heavy. Bryan Bauer, in a column for ATM Marketplace, said from a risk assessment standpoint, EMV at all payments-related aspects of retail will be a best practice before the end of 2016. To avoid any sort of implementation at this point is akin to walking along a high-speed rail: While the trains don't come often, they appear without warning and hit hard. Consider that among the criminal activities that non-EMV stores will be responsible in covering post-liability shift is card skimming. The practice could net criminals thousands of dollars and break a small shop easily. More importantly, as conversion happens, any stragglers post-shift will become easy targets.

What are retailers to do in this circumstance? The most plausible solution is to hedge against fraud by any means necessary. Lender Super G Funding recommended that businesses take on outside money to cover the costs of an upgrade, if they aren't doing so already. This includes applying for loans from a bank or the Small Business Administration. Selling assets can also help pay for the replacement or renewal. Whatever the means of paying it off, the operators of third-party ATMs should definitely put EMV compliance on their to-do lists.

January 18, 2016