DES MOINES, Iowa—Some credit unions may be holding back on converting the card base to EMV due to concerns that the new payment method could mean lower interchange revenue.
Chole Casber, product manager at The Members Group, said he has heard that from credit unions as the October liability shift deadline approaches.
“It appears that some financial institutions are concerned that the change in verification type may impact their interchange, so some are holding off on EMV,” he said
Casber explained the concern is that with EMV increasing the focus on PIN verification, more merchants may choose to go this route, primarily because PIN is safer than signature, and it also lowers the interchange merchants pay to issuers.
“From TMG’s perspective, we don’t think there will be much of a change from how merchants currently route transactions,” said Casber, adding that if more merchants choose to go with PIN over signature, it will likely be a handful of the larger ones.
“Still, we think much of this is misinformation, and don’t foresee much change,” added Casber.
Stocking EMV Plastic
Earlier this year, merchants such as Costco, Walmart and others decided to route all transactions below $50, including signature debit, through PIN-less debit. Under that routing merchants process the transaction as PIN, but don’t require the customer to enter their personal identification number. The purchase is routed to the issuing bank through a debit network instead of a Visa or MasterCard network. That results in lower interchange fees that retailers pay to banks and credit unions.
One issue that CUs should pay close attention to in the shift to EMV, is stocking chip card plastic, said Casber. He said it won’t be as easy to stockpile and obtain EMV plastic as it has been with mag-stripe.
“Plastic procurement will not be the same as it was in the mag-stripe environment, where you could hold stock for ten years,” explained Casber. “EMV card stock has to be managed closely or else you may run into situations that are not favorable, from pricing and availability perspectives.”
Casber said TMG CUs are moving along well with credit conversions, with more than 90% completed on that side of chip cards. Debit conversions are underway and are gaining momentum, he said. Across all issuers, debit has lagged behind credit conversions due to the uncertainty around debit routing that was created by Judge Richard Leon in 2013 when he struck down the Fed’s debit interchange rules. Judge Leon’s decision was overturned by a federal appeals court in 2014.