The U.S. is changing its payment technology and switching over from traditional swipe cards to chip cards. Mark your calendars because effective October 1, 2015 the burden of credit card fraud is being moved from the banks to the retailers. MasterCard, Visa, American Express and Discover expect that if their customer presents a merchant with an EMV chip-based card, they are supposed to be able to process it on an EMV Device.
EMV Fraud liability shifts to businesses for fraudulent chip card transactions unless the business has a Chip Terminal. If you accept a chip card with a magnetic stripe reader, you’ll be responsible for the cost if the transaction is fraudulent. The burden of credit card fraud is, in essence, being moved from the banks to the retailers. Merchants need to act now and upgrade their point of sale systems.
What is EMV?
EMV is a global payment system that entails putting a microprocessor chip into debit and credit cards, making them less vulnerable to fraud for in-person transactions. Because EMV uses better data security, this standard is being adopted in the U.S. EMV terminals are already in use all over the world and growing more and more popular everywhere. By the end of 2015, 70 percent of U.S. credit cards and 41 percent of U.S. debit cards will have security chips called EMV which stands for Europay, MasterCard, Visa. Card issuers are switching to this new technology to protect consumers and reduce the costs of fraud. For merchants the switch to EMV means adding new in-house technology and internal processing systems, and complying with new liability rules. Most debit and credit cards will be reissued with EMV chips by October 2015.
What’s the difference between traditional cards and EMV chip cards?
Traditional cards with a magnetic stripe contain unchanging data including sensitive card and cardholder information. So if fraudsters get ahold of your credit card, it’s easy for them to use. They just lift that data, clone the card, and go on a fraudulent shopping spree.
EMV chip cards, on the other hand, are way more secure. They are smart cards that create a unique transaction code that cannot be used again which prevents the transaction data from being reused fraudulently.
What’s the cost?
The shift towards EMV has big implications for your business. The cost is going to vary by retailer. You will need the EMV terminal or device for every POS station, including mobile devices. You may also need to upgrade your computers and POS software to be EMV compliant.
What if my business isn’t ready in time?
You can still use the old traditional method by swiping the magnetic strip but if the consumer presented a chip card and you didn’t process it on an EMV device, and it is a fraudulent transaction, you are totally responsible for the loss. Any parties not EMV ready by October could face much higher costs in the event of a large data breach.
Currently, if an in-store transaction is made using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card’s terms and conditions.
After October 1, 2015, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction. Any parties not EMV ready by October 2015 could face much higher costs in the event of a large data breach.
Although making the switch carries certain upfront costs, the investment is well worth it when you consider the reduced exposure that your business faces as a result. Contact your merchant service provider today to make sure that you are ready.