The following information will help you better understand EMV and prepare your business for the upcoming October 1, 2015 liability shift date.
What is EMV and why are the card brands implementing it?
EMV technology embeds payment account information into credit and debit cards via a microprocessor chip as opposed to storing the information on a magnetic stripe. Each time a transaction is processed using the EMV chip, a unique cryptogram is is exchanged with the EMV reader which protects sensitive cardholder authentication data and makes it impractical for data thieves to create counterfeit credit and debit cards. Implementing the EMV standard in the United States will help to maintain the integrity of our electronic payment systems, decrease data security risks associated with sensitive cardholder data and reduce credit and debit card fraud.
What is the “liability shift” all about and how does it impact me?
All major card brands (Visa®, MasterCard®, Discover® and American Express®) have agreed to adopt EMV as the go-forward payment standard in the United States. To encourage merchants and card issuers to upgrade their systems to support EMV, the card brands are changing the rules when it comes to who is liable for counterfeit credit and debit card fraud.
Prior to October 1, 2015, merchants who unknowingly accept counterfeit cards in a card present environment are not liable for those transactions so long as they follow proper procedures. In other words, card issuers are currently liable for the losses. Beginning October 1, 2015, most merchant types will become liable for those transactions unless they upgrade their payment terminals or POS systems to support EMV.In order for the liability to shift from the card issuer to the merchant, two conditions must be present: 1) The card issuer must support EMV, and 2) the merchant did not run the transaction using an EMV capable system. After the liability shift date occurs, when a merchant accepts a counterfeit EMV card (including cards that have both a magnetic stripe and an EMV chip) and does not process the transaction using an EMV capable system, the merchant will receive a chargeback and the amount of the transaction in question will be debited from their account.
Should I worry about EMV if I rarely or never get chargebacks?
Yes. When a card issuer knows a fraudulent swiped transaction resulted from counterfeit card fraud, they rarely initiate the chargeback process since they are the liable party and doing so would be futile. So a merchant’s historical experience with chargebacks (or lack of them) is not indicative of what their experience will be after the liability shift occurs. It is possible and in many cases likely that you have already processed counterfeit cards and just didn’t know about it since the card issuer absorbed the loss.
If EMV chip cards being issued in the United States also have a magnetic stripe on them, what’s to prevent my staff from just processing the transaction the old way and does it matter?
It is true that during the initial rollout of EMV, all EMV chip cards issued in the United States will also contain a magnetic stripe. After the liability shift date, in order to avoid counterfeit card liability, merchants who are using EMV capable systems must process chip cards by using the chip reader as opposed to the magnetic stripe reader. The good news is most, if not all EMV capable systems will be smart enough to recognize that the card being swiped is an EMV card and will instruct the user to insert the card. This will make training relatively easy and staff will quickly learn that the fastest way to process EMV cards will be to insert them in the chip reader from the onset.
I want to support EMV in time for the liability shift. What should I do?
Merchants using standalone terminals: An investment in new devices may be necessary. In some cases existing devices may be capable of reading the EMV chip and only require an application update. If you require a new device, the S80 terminal supports both IP and dial communications, is compatible with the Paygistix™ Gateway for added features and functionality and comes standard with built-in EMV and NFC readers. This device will support both contact and contactless EMV. Mobile merchants can utilize the S90 terminal which is similar to the S80 but supports 3G wireless communications.
Merchants using POS systems with integrated payments: It is important to communicate with your POS vendor and tell them you want to use EMV in your system with Payment Logistics. Today most POS system developers do not have a definitive roadmap to support EMV and NFC technology. Payment Logistics offers simple integration technology that allows POS developers to add EMV and NFC support with little development and expense while improving the data security of their system. Through this integration technology, merchants can choose to utilize one of the following payment terminals: