EMV: U.S. Member Convenience Drives ChangeInterview with Merrill Halpern of UNFCU: Why EMV Makes Sense
EMV, short for the Europay, MasterCard, Visa standard, is the chip-and-PIN-based standard used to store card data as mandated by EMVCo. EMV has been adopted in virtually every part of the world for the storing of payment-card data except the United States, where the magnetic stripe still prevails. EMV cannot be skimmed, and most industry experts agree skimming attacks and other card-based fraud will inevitably migrate to the United States, since the mag-stripe makes its relatively easy for fraudsters to copy card data.
Merrill Halpern, card services manager for UNFCU, says the move is one the credit union has been contemplating for a couple of years as a way to enhance member services and improve security.
In this exclusive interview, Halpern discusses:
- The ever-increasing rate of mag-stripe card rejections for U.S. cardholders traveling overseas;
- Why growing fraud trends will push U.S. institutions to adopt chip and PIN technology sooner rather than later;
- The UNFCU's expectation for a massive EMV shift on the debit side down road.
Halpern oversees the Card Services Department at United Nations Federal Credit Union, a financial cooperative that serves the active and retired staff of the United Nations, U.N. specialized agencies and their families in 212 countries and territories. Halpern has more than 20 years' experience in the global payments industry. Before joining UNFCU in 2005, he worked in the product development and operational areas of Citibank N.A., NYCE Payments Network LLC and MasterCard International.
TRACY KITTEN: EMV and the United States. This is Tracy Kitten with Information Security Media Group here with Merrill Halpern, card services manager at United Nations Federal Credit Union. Merrill, before we get started, could you just give our audience a brief overview of what it is that you do in card-services management for United Nations Federal Credit Union?
HALPERN: Right. I lead the product management/business management role for the credit cards and the debit cards that we issue to our members, who are United Nations employees, and their family members that live both in the U.S. and abroad. Out of all of those members, who are also our customers, they also travel quite a bit.
KITTEN: And that kind of leads into the line of questioning that I am going to be positioning today, and that is, what motivated the credit union to make this move toward the EMV issuance for cards issued in the U.S.?
HALPERN: Right. We are a U.S. dollar financial institution, and as you know, the EMV cards are not the normal type of cards being used here. However, they are in great distribution in great use in many parts of the world, especially in areas we have great concentrations of members in Western Europe. We know that in North America there is also a large number of cards either deployed or being deployed in Canada and Mexico, and also in Asia and Africa. Because the cards are widely used and provided by issuers in those areas, merchants have come to accept them as the norm. We felt that it was a service that we needed to provide to our global membership, so that they would have greater acceptance at the point of sale and not be inconvenienced by encountering stores or clerks that did not know how to handle or were ill-equipped to handle a mag-stripe only card to complete a transaction.
KITTEN: And so your decision to move toward EMV for these members that travel overseas quite a bit was probably based more on customer convenience than on security?
HALPERN: Right. For us it is all about member service, so obviously our first interest is in serving our members, making sure that they can complete their purchases without any inconvenience. We had reports over the years of dissatisfaction with our card, even though it offers great rates and great service, if it couldn't be accepted at that key time at the point of sale when they needed to make a purchase in a hurry, they became dissatisfied. And when that happens enough times over time, your card doesn't remain a top-of-wallet, no matter how great your rates are.
Security is also a consideration, but again it goes back to member service. When anybody has an incidence of fraud on their payment card, they get very, very upset. We want our members to feel secure; we want them to continue to bank with us, to keep their deposits here, to bring us other types of business that they do bring for us in great numbers due to our ability to serve their unique lifestyle; and we don't want them to feel in any way that their information can be compromised. We feel that having a chip and PIN card is the best way of ensuring that.
KITTEN: And how many members do you expect to take part in this EMV program?
HALPERN: Approximately 35,000 members in total, which is our whole credit card base, once we are through with all of the reissuing. But we are starting it first with just our Platinum Portfolio, which is our most profitable, highest range of customers, and then we will proceed with the other segments later.
KITTEN: And how many members do you have in the Platinum Portfolio, approximately?
HALPERN: Five thousand, approximately 5,000. We felt that in order to start this and get some hands-on experience that we needed to start with a small amount, so that we can handle it in a quality manner and then be assured that everything is in order before we moved on to the other credit segments and eventually debit. The initial rollout will be in the third quarter of this year.
KITTEN: And when do you expect to have it rolled out to your entire membership?
HALPERN: I couldn't say for sure. We will just continue moving forward and we don't have a timetable for that yet. We will move as quickly as we can, based on production capability and the assumption of smooth operations.
KITTEN: So going back to the question that I posed about customer service versus security, have you noticed significant card breaches on transactions that are conducted by your members, your U.S. members, overseas, or have skimming incidents or card breaches been equal in the U.S. versus overseas transactions?
HALPERN: It has been greater overseas. And again, because we are a U.S. financial institution and our members are so global, basically if there is any scheme, any fraud scheme operating anywhere around the world, we are going to get it.
KITTEN: Because we don't have the security of EMV?
HALPERN: Exactly. Exactly. In other words, like our mag-stripes are available to be skimmed wherever, as are any of the U.S. issuers; and frankly there are a number of industry analysts that have said that now that most of the world is moving to EMV that fraud is going to come to the U.S. I think that should be a concern to many U.S. financial institutions and I think that ï¿½ I know that the U.S. financial institutions less so than credit unions ï¿½ there is a great concern about what this kind of implementation will cost. But I think that any cost of investment will be offset by a reduction in fraud write-offs, which I think should be of great concern to the banks.
KITTEN: Now help me understand this, Merrill, so you are actually making a [distinction] between banks and credit unions where the implementation of EMV is concerned?
HALPERN: Right. Banks have primarily a profit motive. They are concerned about their stockholders, concerned about operating expense. We are concerned about those things, too, but we weigh that against the need to serve our members who are basically our owners. In the end, we are profitable because we are so customer-focused. We are so member-focused that our members are satisfied and they just bring us more business. We find that it is a very, very positive investment.
KITTEN: And how long have you been reviewing this move to EMV?
HALPERN: We have been reviewing it probably for the past two to three years. Because we are a small institution, we inquired in many places where we were told we were too small and the scale wasn't worth it ï¿½ the start-up expense was too high. That is where we were fortunate in finding a partner in Gemalto, because they have a program to start EMV cards called the World Traveler Program. It is saying that you know an institution that has a footprint similar to ours, a U.S.-based consumer that travels worldwide. So because we were very close in our goals, they were more than willing to work with us and to help us get started, and they opened up a lot of doors along the way with Visa and First Data, our processor, that where, in the past, we had less receptivity than we would have liked.
KITTEN: The issuance of the cards, will they be Visa, MasterCard or both?
HALPERN: They are Visa only. Visa is our preferred partner. We work with MasterCard on debit only and I could not say whether we would do a MasterCard chip card, in addition to the credit card program. If it changed, it is the same for this type of card as any other type of Visa card.
KITTEN: Oftentimes credit unions are the more cutting edge of the two, and it is because you have the ability to be a little bit more nimble; and to your point earlier, this will be an interesting issue to watch unfold, because, perhaps, the credit unions may actually be the ones to pave the way for EMV in the U.S.
HALPERN: Exactly. Because we are a small company, decision-making occurs a lot faster, time to pull together the right specialists for implementation happens a lot faster and, as a result, I think we have been fortunate that we have been able to become a leader in a very short time with this product and really make a crack in the wall toward getting greater issuance, and it has got to be a win for all sides. I mean, consumers will have better acceptance when they travel; they will have less fear from encountering fraud and compromise of their information when they transact in the U.S.; merchants will have lower losses and they will be less subject to charge backs; the banks will make an investment at the beginning, but in addition they will have lower write-off expenses.
KITTEN: Yes, it will be interesting. Thank you so much, Merrill. Again, I am speaking with Merrill Halpern, card services manager at United Nations Federal Credit Union. For Information Security Media Group, this is Tracy Kitten.