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PCBB Banc Investment Daily June 19, 2015
Banc Investment Daily
June 19, 2015

Don't Procrastinate

There are a few deadlines that everyone knows by heart. People may forget their spouse's birthday or their anniversary, but no one forgets the day that federal income taxes are due. Still, many people file for extensions, putting the inevitable off as long as possible. Even after an extension to October is granted, people still don't do much work and instead, wait until September to really get rolling on this project. For most, the piles of receipts continue to grow and little is done until the very last moment. It is just human nature to procrastinate, even though frequently the amount of work is the same or worse than doing the task on time.
Speaking of the future, this coming October also marks the beginning of a new era for bank cards. One could argue that there has also been a strong procrastination element to this implementation as well. As bankers know, by October customers will get new sophisticated microchip cards and the fraud risk shifts to the business if they don't have the ability to use the security features of the new cards.
We bring this up because we know some bankers are still discussing this change. There are basically two choices for card issuers when all is said and done - chip and signature or chip and PIN. At a base level, chip and signature cards will be sufficient to avoid liability in the case of fraud, but it seems to be a somewhat short-sighted fix when the quantity of card fraud has grown so much. Further, card companies have long known that PINs are more secure but have procrastinated, citing concerns about customer preference and convenience. Bankers will have to find a balance that works for customers and works for the bank, so discussions continue.
The result of the reliance (until now) on signatures, is that the US is home to 50% of all card fraud worldwide, yet we only account for 25% of card transactions in the world. Certainly the upcoming deadline for new chip cards should be a turning point, but experts doubt the implementation will be completed by the deadline. In fact, the Smart Card Alliance estimates that by the end of 2015 only 70% of the credit cards issued will be EMV cards and the numbers for debit EMV cards will be worse, around 40%.
You might also be interested to know that the Payments Security Task Force studied the 8 largest card issuers. It projected that about 63% of cards will have chips by the end of 2015 and it will take another 2Ys for 98% of cards to be compliant. Javelin Strategy and Research analysts predict it could take even longer. They project it will take until 2018 for 96% of credit cards and 98% of debit cards to be reached. Worse still, the Payments Security Task Force forecasts only 47% of smaller merchant terminals will be ready by next Christmas, so more work remains to get there.
Community financial institutions can use this transition period as an opportunity to get in touch with customers. Use the time to help people understand the change, find out what they might need and let them know EMV makes their transactions more secure. It's not every day that bankers have a good reason to talk to every customer - business or retail - so take the opportunity and engage. As you do, be sure to let them know what you are doing with EMV to protect them and to illustrate other opportunities you may have for them. Now is the time, so don't procrastinate!