ATM owners and operators will watch closely and provide support from the sidelines as the new Debit Network Alliance seeks to resolve the industry's nagging EMV debit routing issue at the retail point of sale.
Routing EMV-chip card transactions at an ATM may not be as complex as at a retail POS, but much is at stake in terms of the flexibility ATM owners currently enjoy in establishing routing with processors and hosts, says David Tente, executive director of the U.S. chapter of the ATM Industry Association.
"Currently, if an issuer hasn't provided a preference for routing, it is left up to the acquirer and the ATM operator to decide," Tente says. "In the EMV world, it wouldn't make a difference what the acquirer or ATM operator wanted."
The ATMIA released a white paper this week calling for payments networks to work collaboratively with ATM deployers to retain market flexibility in routing choices. The association's plea for collaboration was made public the same day 10 PIN debit networks announced the creation of a new company, the Debit Network Alliance.
The new company's mission is to bring together all debit networks, including the major card brands, to share technology for a common application identifier on cards that will allow merchants a choice of two or more routing networks.
The common AID, as it is called, would allow U.S. merchants to comply with the routing mandate of the Durbin amendment in the Dodd-Frank Act.
But the ATM industry is on hold as far as how EMV smart cards will be coded, along with the rest of the payments industry, because of federal Judge Richard Leon's July ruling that the Federal Reserve Board needs to re-examine its implementation of the Durbin amendment's requirements for debit fee caps and routing choices.
The debit networks and major card brands had not resolved the routing issue in the U.S., but were making progress prior to Leon's ruling throwing up a stop sign. Ownership of the technology for routing and governing its use have been major hang-ups all along.
"Our association fully supports that kind of collaborative approach [that the new alliance is taking]," Tente says. "We need to resolve this issue and get beyond it."
The creation of the network alliance company and the uncertainty over the federal ruling puts the payments industry "at an important juncture in the process," says Bruce Renard, executive director of the National ATM Council.
"Durbin doesn't cover ATM transactions, per se, but it still has a chilling effect on the process," Renard says. "We are happy to see this new company that is committed to spearheading a common AID in the U.S."
ATM owners and operators remain concerned because the U.S. still does not have a specification for EMV, yet liability shifts for ATM owners loom in 2016 with MasterCard and 2017 with Visa, Renard says.
"The current uncertainty centers on a lack of upgrade kits and new machines," Renard says.
In addition, getting ATMs certified for EMV acceptance "literally machine by machine" will take a significant amount of time, Renard adds.
"The overall timetable and expenditures add up to questions about whether the liability shift timeline is fair or not," Renard says. "We have grave concerns that they are not."
Paul Tomasofsky, executive director of the Debit Network Alliance, says he understands why ATM operators are anxious about what will happen next.
"It's not near as complex as the POS because of Durbin, and there are lot more POS terminals than there are ATMs," Tomasofsky says. "But there are routing requirements and rules that an ATM owner and the issuer need to agree on."
As such, ATM routing and future standards are clearly a part of what the Debit Network Alliance hopes to achieve, he adds.
Renard says the ATM industry is still trying to determine the effect of the April liability shift for MasterCard's internationally-issued EMV Maestro card transactions at the ATM.
With a 90-day lag on chargebacks, Renard says his council is just now starting to see chargebacks from Maestro cards turning up. Still, an agreement the national council made with MasterCard to block Maestro transactions on ATMs that rarely handled those transactions and for the card brand to put more of its fraud-prevention tools on those machines that did handle a lot of Maestro traffic has worked out well, he adds.
The EMV debit routing debate and ensuing liability shifts present more of a problem for the ATM industry than compliance with Americans with Disabilities Act measures for handicap access in 2012, Renard says.
"Nothing [to challenge compliance] would happen immediately the day after the ADA deadline, but with a liability shift, that's it," Renard says. "The very next day, you are on the hook for fraud if you do not have an EMV-compliant machine."