ATM operators have a lot at stake in the fallout of a federal judge's ruling last week that the Federal Reserve Board needs to review the debit fee caps and network routing mandates set under the Durbin amendment.
The court ruling calls for the board to review and lower the fee cap it established at 21 cents per transaction and also to assure that the spirit of competition is served in how merchants receive multiple debit network routing options.
The judge's ruling could further complicate the messy migration toward EMV-chip card acceptance at ATMs, says Sam M. Ditzion, CEO of Boston-based ATM industry consulting firm Tremont Capital Group Inc.
The card networks will shift the liability for fraud to ATM operators if they cannot handle EMV cards within the next few years.
If not for the pending liability shifts, operators might not be overly concerned about the judge's ruling, Ditzion says.
"Whether is it today, tomorrow or in 2017, ATMs will still work with mag-stripe cards, no matter what happens with EMV," Ditzion says.
Mostly, ATM operators view the latest developments as another stumbling block that will slow down the issuing of EMV debit cards and the U.S. migration to the chip-based technology, says David Tente, executive director in the U.S. for the ATM Industry Association.
Essentially, ATM operators can't prepare their units for EMV acceptance if they don't know what type of coding the cards will ultimately present.
"Even if a solution to the routing and fees was approved tomorrow, ATM owners still can't get their fleets converted for EMV by the card brand deadlines," Tente says.
In addition to potential fraud exposure, ATM owners will face escalating costs to convert fleets because workers may run into overtime trying to beat the clock, Tente says. "There will be bottlenecks for parts and readers because everyone will be ordering them at the same time," he adds.
MasterCard and Visa also "may not have the bandwidth" to get all of the proper ATM certifications done in time if there is a last-minute rush, Tente says.
With those factors in mind, the ATMIA is calling for the global networks to adjust the liability-shift timelines "to fit broader industry needs," Tente adds.
National ATM Council executive director Bruce Renard says he hopes the judge's ruling on fee caps won't delay the progress the industry has made in establishing a common application identifier on debit cards for network routing. The Durbin amendment requires that merchants have a choice of at least two debit networks when routing transactions, a situation made problematic for coding EMV cards in the U.S.
Even prior to the court ruling last week, there was no common AID for EMV debit routing. But progress was being made, with Visa and MasterCard agreeing to share their technology and independent debit networks earlier saying MasterCard and Visa applications were welcome on their Discover-based common AID.
"If they reopen that issue, the National ATM Council, early on, was recommending four 'bugs' on a card, two for signature networks and two for PIN networks," Renard says of his Jacksonville, Fla.-based trade association that represents independent ATM providers and suppliers in the U.S.
Speculation rose last week that debit cards ultimately would be coded in this way.
"That would be a positive thing for ATM operators and providers," Renard says.
Tente says the Durbin amendment does not dictate a routing choice for ATM operators. However, "ATM acquirers and owners still want a routing choice," Tente says. "The industry wants that flexibility in establishing rules and programs for the ATM."
That ATM operators are confused as to what might happen next is "a sign of the times that illustrates the ineptness of government" when it gets involved with financial industry issues, says analyst Russ Schoper of Atlanta, Ga.-based Business Development International Inc.
"The government's view on this is not balanced and hasn't taken into account all of the players and all of the ramifications," Schoper says.
ATM operators have recently dealt with the complexities of complying with the Americans with Disabilities Act, and now they face uncertainty over Durbin and EMV, Schoper says.
"It's just a never-ending barrage for the ATM manufacturers, the banks and the ISOs who deal with ATMs," Schoper adds.
Regardless of the current confusion, ATM operators are not likely to lose business if banks decide to scale back or eliminate their debit card portfolios, Schoper says.
"Banks have been promoting debit cards in a major way for many years, and they are prolific in the credit union world," Schoper says.
If debit profits shrink as a result of the court ruling, banks may pull back a bit, but they would never stop issuing debit cards, he adds.
Tremont's Ditzion agrees. "Banks are not going to give up their debit card portfolios because, no matter what happens with Durbin, they are still a compelling product to offer," Ditzion says.