EMV Credit Card Liability Shift

Jun 29, 2015

Over half of the world’s credit card fraud occurs within the United States where magnetic stripe credit card technology remains standard. Outside the U.S., EMV technology has significantly reduced counterfeit fraud levels and has become the model of the future.

EMV, or Europay, MasterCard and Visa, is the global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. A small, “smart” microprocessor computer chip embedded in the card makes it nearly impossible to counterfeit. Unlike current payment terminals which require customers to ”swipe” their card, EMV technology involves the insertion of the card into a processor so the chip can be read and customer data received.

The EMV shift has finally arrived in the United States! October 15, 2015 marks the deadline for compliance required for both merchants and card issuers. Merchants must obtain new devices to read customer’s card. In addition, the card issuer will issue new cards with embedded chips. Currently, if a merchant processes a fraudulent card, the card issuer absorbs the cost. However, as of October 15, if someone pays with a fraudulent chip card and a merchant has failed to upgrade to an EMV reader, the liability falls on the merchant, hence the term “liability shift.”

There are multiple ways in which an EMV payment system will take payments. It is recommended that merchants review their existing POS equipment or systems to learn if upgrades are possible or whether new EMV-compatible POS hardware must be purchased. Merchants should take into consideration their business setting when determining what equipment is best (contact, contactless, etc.). It is suggested that merchants contact their current processors and ask about potential equipment upgrades. EMV-compatible terminals have been on the industry’s radar for a while now, and it is very likely that most processors have an offering that will work with the merchant.

So why the change?

It is estimated that credit card fraud costs card issuers over $8 billion a year. In the wake of numerous large-scale data breaches and increasing rates of counterfeit card fraud, U.S. card issuers are migrating to this new technology to protect consumers and reduce the costs of fraud. Most of the world, including Europe, has been using chip cards for years. The United States is actually the last major market still using magnetic-stripe-only cards.

If you haven’t considered making the upgrade to EMV, now is the time to start thinking about making the change. Discuss the upcoming liability shift with your POS provider to ensure you’re ahead of the game. Although upgrading to an EMV system may seem costly now, the cost of a security breach will be much, much higher.

By: Jessica Sloan, Marketing Manager

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