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V O L . X X I N O. V I I I A P R I L 2 0 , 2 0 1 5 34 B A N K I N G & F I N A N C E F O C U S Norway Savings issues only debit cards, working with an outside party for credit cards. It plans a rollout over the next three years of the new EMV cards, starting with cards up for renewal and cards for customers who travel frequently. e bank will have to replace 30,000 debit cards. While the U.S. EMV cards and readers likely will have both the magnetic stripe and EMV chip for up to a decade, some businesses in Europe and Canada only can read EMV cards. One reason banks aren't hurrying to make the change: they already are car- rying the fraud burden, so they're not as sensitive to it as merchants might be, Whitney says. He suggests that because the more fraud-prone magnetic stripes will be around for many years, that con- sumers check their statements carefully. " e cost of shifting is signifi cant," he says. " e business case in the liability shift isn't compelling [in itself ]. e rep- utational risk component, for example Target, may drive the whole thing." While Whitney expects most banks to adopt EMV, he says some merchants may not even know about the impend- ing October deadline. At a recent talk before the Maine Bankers Association, Whitney, along with about 32 other banking colleagues in the room, admit- ted they are worried customers will blame banks if they don't know about the switch in fraud liability and haven't readied their computer systems. "Merchants will blame us when the fraud comes back to them," says Tammy Plummer, senior vice presi- dent and chief information offi cer at e First N.A. Like Norway Savings, e First plans a staggered rollout of EMV cards starting in the fall. Craig Garofalo, senior vice presi- dent and chief operating offi cer at Kennebec Savings Bank, says his bank already has its ATMs converted, and plans to reissue cards as they expire. "I'm not feeling a ton of pressure with the October deadline. We already have the liability," he adds. And while market researchers esti- mate that 59% of retail locations are expected to comply with EMV by the end of 2015 and 86% of fi nancial insti- tutions will issue EMV debit cards in the next two years, Garofalo says he'd be shocked if more than 25% of the mom-and-pop shops make the transi- tion by October, though larger chains like Sam's Club will be ready. Another downside is that transaction costs are higher with the new cards, says Zach Nichols, a management trainee at Kennebec Savings Bank who has been focusing on EMV. "It's about 1.5 cents more. It doesn't sound like anything until you see that it's hundreds of thou- sands of transactions." One upside for banks: they can reconsider whether they continue their relationship with MasterCard or Visa, since the credit cards will have to be reissued in any case. "We're reviewing all of our current Visa branding," says Plummer of e First. " ere are incentives from the card companies, so it's a good time to look at your brand." Whitney, whose bank has ties to MasterCard, says he is making the same assessment. Another concern is customers. e new EMV cards aren't swiped through a merchant's terminal or into an ATM. ey are inserted into a reader for several seconds during the transaction. at has led to worries of consumers walking away from trans- actions without taking their cards. One banker at the Maine Bankers Association meeting said Canada experienced a 10% to 12% "leave- behind" rate of the new cards. Still others worry that the extra seconds for the transaction will discourage impatient consumers. e long-term trend, several bankers noted, is toward contactless systems using smart phones instead of credit cards, like Apple Pay, with the same use of the one-time transaction number. e EMV chips do include the capability for contactless use, Whitney says, though his bank and others, he suspects, won't initially use that feature, which is known as near fi eld communications. L V , M a i n e b i z s e n i o r w r i t e r, c a n b e r e a c h e d @ LV a n d a t @ . » C O N T I N U E D F RO M P R E V I O U S PA G E Property & Casualty • Workers' Compensation • Health Insurance • 401k specialists in business insurance and employee benefits 800.777.5244 www.TalkWithNorton.com Talk with Norton. Securities & Advisory Services offered through Commonwealth Financial Network, member FINRA /SIPC, a Registered Investment Adviser. Investment advisory services may be offered through Commonwealth Financial Network, a Registered Investment Adviser, and/or Norton Financial Services, a Maine and New Hampshire-Licensed Investment Adviser. Fixed insurance products and services, investment advisory services, and TPA services offered by Norton are separate and unrelated to Commonwealth. 275 U.S. Route One, Cumberland Foreside, ME 04110 ExcEllENcE is earned It's always an arms race with fraud. It's costly to replicate these EMV cards. With the random number generation, anything dynamic is much better than a magnetic stripe. — Nick Holland, analyst, Javelin Strategy & Research

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