What does EMV stand for? It is short for EuroPay, Mastercard, and VISA, the three companies that combined to develop the new standard for chip-based credit cards. EMV represents the next step to prevent credit card fraud through point-of-sale transactions.
EMV cards contain a computer chip embedded within the card itself that generates a unique set of information for each transaction, as opposed to the old magnetic stripe technology that contains all of your payment information. The cards are very difficult to duplicate, discouraging that method of fraud.
The U.S. has lagged behind in the adoption of EMV technology for credit card security, but time is finally running out for many point-of-sale (POS) merchants. Starting in October 2015, the Payment Networks Liability Shift changes the rules on liability for fraudulent POS transactions. After that date, liability lies with the party that has taken the lowest level of precaution (in other words, not supporting EMV).
If a customer uses a traditional magnetic swipe card, the same rules still apply. The bank or financial institution that issued the card is liable for fraudulent purchases because they have not taken the initial step to upgrade. The issuer is also liable if both parties have EMV technology and a chip-based card is used at a chip-enabled terminal.
However, if a chip-based card is swiped through a magnetic-stripe only reader, then the merchant is liable for the fraudulent transaction. Since the card issuer adopted the new protective measures but the merchant did not, the merchant is assumed to be the negligent party.
ATMs and automated gas pumps have an extra year to make the transition before liability shifts. The liability is still limited to POS transactions, so transactions where the card is not present and keyed in separately (phone or Internet orders) are not affected.
As a merchant, what do you need to do to be ready for the change? Do you even have to switch to an EMV reader at all?
You can opt not to make the transition right away, since chip-based cards will continue to have a magnetic strip and EMV readers will continue to be capable of swiping traditional magnetic cards for the foreseeable future. There are no fines or penalties for not complying. However, you now have a new source of liability, and crooks are likely to consider you an easier target.
Assuming you decide to switch, you have many choices. Your current payment processor likely has their own preferred reader, but now is the perfect opportunity to shop for payment processor and equipment options. It is somewhat analogous to switching cellphone service providers. If your payment processor has not contacted you yet, be proactive and ask about their reader options and costs. Be sure to include any software changes and training that are needed to make the system functional.
Most EMV card readers are also capable of the near-field communications (NFC) technology that is necessary for newer mobile payment systems. If you are changing your system, you probably want to have mobile payment capability as well — but run a cost-benefit decision after you shop around for alternatives. If you are a small merchant, you realistically may not be able to afford a top-grade EMV terminal.
Assess your customer base and your options for payment processors and readers, and do a cost-benefit analysis to decide which system is right for you — but get started right away. Otherwise, you may be making a last-minute decision with limited information. Give yourself time to shop around and make an informed decision.
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