That ATM at the back of the bar may soon get eighty-sixed

Owners face deadlines to convert to chip card technology “There are many ATMs out there that simply cannot be upgraded”

That ATM in the dark corner of the bar could be on its way out. ATM owners in the U.S. are under pressure to replace or upgrade their machines so they can read the security chips embedded in newer debit and credit cards. The MasterCard and Visa networks plan to make owners responsible for the cost of fraud perpetrated at machines that can’t read chips. But the upgrade is so expensive that some cash station operators plan to shut down their less profitable locations.

Abe Ayesh, chief operating officer of FAM ATM, which manages 8,000 machines, says revamping his existing fleet will cost $4 million—his company’s entire annual earnings before such charges as depreciation and taxes. But for some hard-to-upgrade machines in low-traffic areas, it might take years to earn back the cost of a replacement. In those cases, “it’s

not worth it,” he says. Ayesh expects to drop about 40 machines.

In general, costs to upgrade an ATM’s hardware and software start at $300 and go to $3,000 for a full replacement. Some 410,000 ATMs in the U.S. have to be upgraded, according to researcher Aite Group.

Up to 10 percent of so-called retail ATMs—those not owned by banks and often found in convenience stores, hotels, and bars—may be thrown out instead of souped up or replaced, says James Phillips, a vice president at ATM maker Triton Systems of Delaware. “There are many ATMs out there that simply cannot be upgraded,” he says. “They end up in landfills. It could have an impact for some cardholders in rural areas where there’s only one to two ATMs that they have access to.”

Card issuers typically eat the cost when someone uses a counterfeit card at a cash machine. Starting in October, MasterCard will shift that liability to ATM owners that don’t adopt chip technology. In October 2017, Visa will enforce a similar rule.

The chip technology is designed to make it harder to use fake cards and to thwart skimming—crooks modifying cash machines to collect users’ PIN codes and card numbers. Retailers have also been changing their equipment to use the technology.

So far only about 20 percent of U.S. ATMs read the security chips, according to MasterCard. By Oct. 1 that will creep up to 35 percent, says Bruce Owens, a senior vice president at MasterCard, and it could hit 60 percent by mid2017. Even ATM owners that are willing to pay for the upgrade may find it hard to meet the October deadline. The biggest challenge for companies like Ayesh’s right now? “It’s getting the upgrade equipment,” he says.

The bottom line New security chips in debit and credit cards make fraud harder, but getting older machines to read them can be costly.