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MasterCard “Chips” Away Liability

MasterCard “Chips” Away Liability

For quite some time, consumers have shopped with more confidence with their credit cards knowing that if their cards are stolen or their accounts hacked, they will have little, if any, of the liability associated with stolen credit.

Now, though, ATM owners might be facing that liability as MasterCard issues an ultimatum – do it or else. There’s no doubt the technology provides new protections, but it also adds expenses for retailers, service providers and others who offer ATMs. In a tough economy, it’s an expense many simply can’t cover.

In 2011, the credit card giant issued a memo “strongly encouraging” ATM owners to bring their machines current and ensure the technology is available for the new chip card credit and debit cards. If they don’t, MasterCard says the burden of fraud will fall squarely on their shoulders. These ATM owners were given until April 19, 2013 to make their move. The new requirements and updates were issued last week.

Liability Shift

It’s being referred to as the “liability shift” program and it’s already in place in several other countries and the new deadline is applicable to the U.S. and certain Asian Pacific regions. Other countries face similar ultimatums, but places like Australia and New Zealand have until 2015.

Two years ago, when the orders came down, it was explained by MasterCard as,

The purpose of the liability shift is to align technology efforts to prevent and manage fraud,

though he declined to provide any kind of formal documentation or details. The goal, both then and now is simple: to reduce fraud. The new technology ensures that much. Unlike its biggest competitor, Visa, MasterCard chose to focus on ATMs before turning their attention to traditional point of sale transactions, like those you find in retail stores and gas stations.

Visa Trailing

For its part, Visa says its merchants must accept chip cards that adhere to the EMV standard by October 2015 to avoid a shift of liability for fraud to the merchant’s acquirer. In MasterCard’s program, the liability would shift to the ATM acquirer under similar circumstances.


One of the problems, at least early one, was the confusion surrounding the technology. Commonly referred to as “chip and PIN”, those cards that use EMV standards are far safer and allow for encrypted data to further protect consumers, banks and service or retail industries. For MasterCard, it’s simple: It wants to go after the biggest problem for consumers around the world: a lack of security at ATMs.

Another reason this is so important is because so many of the other countries already have this advanced technology, US consumers are the ones crooks are going for because our technology lags. It’s easier to manipulate the magnetic strips and exploiting consumers that way is too tempting. Once you start considering the numbers, it makes sense to fast track the safer options. Per ATM in the U.S., skimming results in losses of $50,000 annually. Debit cards are three times more likely to be compromised at ATMs than their credit card counterparts. With prepaid debit cards growing fast in popularity, there’s a new avenue for criminals to pursue and cash out on. It’s another reason MasterCard is targeting ATM owners first.

Crooks Target Americans

Avivah Litan, Vice President for market research company Gartner, Inc. explains it this way,

MasterCard’s program needs to get done for EMV to be meaningful, it is a good thing they are requiring it. Visa should have too.

Visa is sure to follow in the near future, as well. Further driving home the point is a survey conducted late last year. In it, the numbers flesh out the relevance of the new technology; 27% of card consumers around the world have experienced credit card fraud first hand over the past five years. In the U.S, that number nearly doubles and comes in at 43%. Americans, by nature, love their plastic. This provides a rich hunting ground for crooks looking to take advantage of our love affair with our credit cards.

For some time now, retailers and other service industries have resisted the changes. The cost, they explained, was cost prohibitive. Still, and even as they made those arguments for years, they knew it was a move that had to be made,

EMV provides an extra layer of security for consumers which have helped drop the fraud levels down in Europe,

says Mike Braatz, who is the senior vice president of ACI Worldwide.

ATM Makers

Even though there was a two year grace period, most say MasterCard was “aggressive” in its requirements Both Diebold, Inc and NCR Corp., two of the biggest ATM companies, say they support the decision and they have been been anticipating these upgrades for years and as a result, have long since been ready to make their move here in the U.S. After all, they’ve already provided the upgrades to machines in other countries. MasterCard “seems to be attacking the criminals’ redemption [of cash] squarely where it belongs,” says Chuck Somers, vice president of ATM security and systems for Diebold.

Some banks have taken a middle of the road approach in these transitional years. Bank of America, for instance, issued new no swipe cards recently and they incorporate both the traditional magnetic strip as well as the microchip enabled EMV technology. The bank said many of its customers often travel outside the U.S. and it wanted to be sure they weren’t inconvenienced with the two different technologies. In fact, in some countries, cards without the new EMV technology aren’t even accepted, which is incredibly inconvenient for the unprepared traveler.

Remember – this “new” technology is built on efforts dating back to World War II when our military used it to differentiate our planes from the enemy.

What are your thoughts about the new technology? Should the U.S. have already been in the game? Do you think our technology is too far lacking? And if you travel, have you used the new technology in other countries? Share your thoughts with us.

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