ATM Industry Issues and Updates the ATM Industry Association ATM Industry Issues and Updates Federal Reserve Board of Governors Meeting – April 6, 2017 1 1

Agenda ATM Industry Issues and Updates 1 Introductions and overview 2 ATMIA – who we are and what we do 3 Dodd-Frank and Durbin – repeal/reform? 4 Withdrawal fraud (Reg E) 5 Continuing EMV concerns 6 Questions/discussion

Benefits of Membership A global trade association of over 8,000 members Representing the interests of all ATM operators/acquirers and other stakeholders An extensive library of Best Practice manuals Compliance monitoring services ATMIA Academy; e-training and certifcation Global benchmarking study bi-annually Industry advocacy Annual security survey Working committees focused on security and compliance A leadership role in the industry regarding payments and financial self-service Broad industry constituency Financial institutions ISO/IAD Manufacturers EFT networks Payment processors And many others . . .

ATMIA membership Representing the entire ATM industry

ATMIA partnerships Collaboration and cooperation with many other groups

ATMIA industry engagement What we are working on . . . Celebrating the 50th anniversary of the ATM A big part of our annual conference in February Daniel Gonzalez spoke on payments improvement Focused on innovation and what the future may hold Also the 20th anniversary of ATMIA Committee groups ATM Acquirer Transactions Forum Next Generation ATM Architecture Cash, security, many others . . . Considering a new security conference in the U.S. Focused on physical and logical security for ATMs, cash, transactions

ATMIA industry engagement What we are working on . . . With the Federal Reserve . . . Active member of the Faster Payments Task Force Invited to be a panelist on the Mobile Payments Innovation Workgroup this January in Boston Today’s meeting, and two previous since 2014

ATMIA industry engagement Regulatory activity at the state level All members have free access legislative monitoring and compliance services for all 50 states, Washington DC, and Puerto Rico State activity has grown considerably The majority is related to TANF/EBT payments So far this year, received 184 alerts ATM related, proposed legislation Even some major cities Many are very intrusive Where in store the ATM must be located 50’ clear perimeter if outside Direct line to 9-1-1 services

ATMIA industry engagement Recent regulatory challenges – one of our “favorites”

Dodd-Frank, Durbin uncertainty Some sort of reform appears to be likely ATMIA is not taking a position on whether Dodd-Frank or the Durbin Amendment should be repealed or reformed More concerned with what it looks like when it’s over Market forces should be permitted to work Primary issues are long-standing concerns that stifle competition ATM operator routing choice; multiple networks Surcharge (convenience fee) caps Variable (discriminatory) surcharging So-called “honor all cards” rules

Withdrawal fraud Fraud and abuse of the Reg E dispute process ATM withdrawals Numerous withdrawals, numerous ATMs, legitimate card and account Operator notified ATM operator is notified of the claim and process Claim resolved Operator rarely recovers full cost; no consequences to fraudster Day >60 Day >66 Claim closed Day 0 Day >61 Day ?? Day 180 Claim filed Fraudster waits as long as rules allow, files non- dispense claims for all transactions Operator response The operator often has only days to respond; fees incurred

Withdrawal fraud Fraud and abuse of the Reg E dispute process ATMIA research in 2015 indicates that this is a $20 – 25 million issue annually About 20% of all non-dispense claims are fraudulent Often 10 – 20 such claims from same cardholder No real progress to date in finding a resolution Revenue stream for many networks Issuer suffers no losses if off-us No real consequences to the cardholder Need for some sort of penalty or disincentive

EMV issues and concerns No real changes or improvements The same concerns over EMV still exist Proprietary technology controlled by the global card schemes Designed to favor those global card schemes Having a negative impact on competition "Integrated Chip Payment Standards: The Next Generation” meeting held in December, 2013, at FRB Philadelphia Significant support for a new chip standard ATMIA and other industry groups will push for EMV to be an open standard with public governance In the process of creating a Position Paper Improve chip security and advance the technology

Thank you Questions/Discussion

ATM Industry Association (ATMIA) David Tente Executive Director, USA, LATAM david.tente@atmia.com www.atmia.com @ATM_industry ATM Industry Association