RANCHO CUCAMONGA, Calif.–As predicted, there is confusion among U.S. consumers and retail cashiers as EMV rolls out, with one website even recommending “microwaving chip cards” to destroy the data the new plastic carries.
Several sources revealed that as the use of EMV increases following the Oct. 1 liability shift deadline, so too has trouble at POS terminals, especially with merchants in various stages of installing new hardware. But there is an opportunity in all of this, several sources to CUToday.info, for credit unions to reconnect with cardholders and build stronger ties.
Payments networks, issuers and retailers are reporting the problems. That has included national attention, including an NBC Nightly News report that consumers are becoming frustrated when they can’t complete a transaction due to issues with the chip card or the POS terminal or, as has often been the case, with the user. Much of the frustration has come from consumers waiting longer in lines as the EMV transaction simply takes more time.
“In speaking with MasterCard and Visa, as well as with some issuers, it’s a little messy out there now,” said Sarah Grotta, director of debit advisory service at Mercator Advisory Group, during a recent CO-OP Financial Services’ webinar on EMV. “Many consumers have heard they need to ‘dip their chip,’ but don’t leave it in the terminal long enough. They pull the card out and the transaction does not complete.”
That was the No. 1 EMV concern outlined by experts this summer as the country approached Oct. 1.
Some Issued Chip And PIN
Grotta said a small percentage of cardholders have been issued chip and PIN cards. Reportedly, Target has issued chip and PIN for its proprietary card. Most issuers
Michelle Thornton, CO-OP FS
have opted for chip and signature.
“Not many merchants are PIN enabled, so for those with chip and PIN cards the POS confusion is greatest,” said Grotta.
Grotta said that many consumers are reverting back to their mag-stripe cards when the chip card experiences an issue. “The good-old card they know is going to work.”
Some consumers, too, are going back to cash.
“Some cardholders become so confused and concerned about the information that is stored on the chip itself that they will attempt to destroy the chip,” said Grotta. “There is even a website advocating that cardholders microwave their card to disable their chip. There are all sorts of crazy stories out there.”
Grotta cautioned CUs to be vigilant for real issues members are experiencing, especially “fallback transactions”—when the chip card is used at an EMV terminal but the terminal reverts back to mag-stripe to complete the transaction.
“This can happen when the terminal is not properly updated, and it can also happen if the chip in the card is faulty,” said Grotta. “Maybe something happened to the chip during the personalization process.”
Watch For 'Fallback Transactions'
Grotta advised that CUs pay close attention to fallback transactions as they could be attempts by fraudsters to steal money from accounts.
“A fraudster can steal a chip card and deliberately damage the chip, and then copy stolen card info onto the mag-stripe portion of the card,” explained Grotta. “When they go to use that chip card, the POS terminal will see that chip as damaged and then revert to mag-stripe, where the stolen account information is housed. It’s hard to tell if a fallback is a legitimate transaction where the POS terminal or card experienced an issue, or if it is an attempt by a fraudster.”
Grotta said that Mercator is not recommending issuers deny fallback transactions, but instead follow up with retailers to see where the problem occurred—on the merchant or cardholder side.
“If the transaction does turn out to be fraudulent and it ran as a swipe, the issuer is the one who authorized the transaction and will be on the hook for the damages,” she said. “This is just one of the glitches we will have to deal with. Eventually we will get this figured out.”
Michelle Thornton, director of product development at CO-OP, who hosted the webinar, recommended that credit unions work closely with members to educate them on chip card usage and some of the issues in the marketplace now, noting that CO-OP offers a great deal of EMV educational materials. She said it’s an opportunity not only to help members but reconnect with them to strengthen relationships and the CU’s position as a trusted advisor.