Understanding EMV and the nuances surrounding the liability shift is important to maintaining your position as the trusted technical advisor to your clients. This article will help cement your basic EMV knowledge while putting you in a position to accurately advise your merchants on how best to protect their business from EMV related losses.
What is EMV?
EMV technology embeds payment account information into credit and debit cards via a microprocessor chip. Each time a transaction is processed using the EMV chip, a unique cryptogram is sent to the card issuer that validates the transaction did in fact originate from a bona-fide card belonging to the cardholder. This makes it nearly impossible for data thieves to create counterfeit credit and debit cards from stolen chip card data and ultimately addresses the problem of counterfeit card fraud in the United States.
What is the “liability shift” all about?
To encourage merchants and card issuers to upgrade their systems to support EMV, the card brands changed their rules effective October 2015 so most merchant types (including restaurants) would become liable for counterfeit card fraud that occurs on credit and debit cards where the card issuer supports EMV and the merchant does not. Regardless of a merchant’s past chargeback history and average ticket size, if they do not support EMV acceptance now, they should expect to incur EMV related chargebacks.
What about stolen card fraud?
Stolen card fraud occurs when the cardholder’s physical card is lost or stolen and used to make a fraudulent purchase. When a card issuer prefers Chip and PIN over Chip and Signature, then the merchant’s payment solution must be PIN capable in order for the merchant to be shielded from stolen card fraud liability. Some EMV solutions that are PIN capable also support PIN Bypass which allows the transaction to be run as Chip and Signature so long as the card issuer approves the transaction. When a PIN preferring card is used and PIN Bypass is performed, the merchant is still shielded from stolen card fraud liability. If on the other hand the merchant’s EMV solution has PIN disabled altogether, the merchant will always be liable for stolen card fraud.
Does tip adjustment work with EMV?
Yes, tip adjustment works just like it does for non EMV transactions.