In 2015, the payments industry instituted a new set of liability rules for card-present transactions. With the introduction of EMV chip cards (the “EMV” stands for Europay, Mastercard and Visa), this new secure form of payment meant businesses were responsible for adopting compatible equipment to accept payments for these cards. Whereas magnetic stripe cards of the past had been used and swiped on machines (and were easily duplicated and susceptible to fraud), EMV cards use technology that hinders card-present fraud.
The shift has greatly benefited consumers and merchants. In March 2018, Visa reported counterfeit fraud at American chip-enabled merchants is down 76 percent. The new merchant services technology is working, which is great for consumers.
While EMV technology has been around for several years now, some consumers still have questions about its usefulness and usability. Because more than 75 percent of consumers prefer to pay with plastic, EMV chip card technology is bound to affect your business if you accept credit cards. This is especially true now, since if fraud occurs when a consumer was using an EMV chip card on non-EMV equipment, the responsibility is placed on the business.
Following is more information on how EMV chip cards work, how EMV-enabled credit card processing terminals protect consumers, and why businesses must make the shift to EMV equipment to stay protected.
To understand EMV chip cards, first let's examine magnetic stripe cards. On these cards, cardholder personal and payment information is stored in the card, making them easy to counterfeit. When consumers use these cards, their personal information is vulnerable during every transaction.
With EMV chip cards, consumer information is stored on a secure computer chip in the card. Instead of swiping the card, the card is placed inside the card reader – another term to describe this action is to “dip.” As the card is dipped, a secure, unique code is generated to complete the transaction. Unlike magnetic stripe cards, where the card data is the same and can be replicated to be used over and over again, EMV chip card transaction codes change every time.
Dipping cards into some EMV terminals may take a few seconds longer to process than swiping; however, as seen from the security benefits and fraud prevention that has occurred, those extra few seconds are highly valuable. In addition, providers like North American Bancard have introduced EMV terminals with “quick chip” technology, which can reduce the processing time significantly.
Consumers should be careful not to remove their chip card too quickly from a terminal, as it can nullify the transaction. Mastering this minor learning curve enables EMV equipment transactions to process smoothly.
Contactless EMV chip cards work with near field communication (NFC) technology and can be “tapped” on a reader for payment on certain machines. This is the same technology used when tapping a smartphone or smartwatch to pay. Contactless payments are expected to account for one-third of in-store payments by 2020, reports VentureBeat. EMV chip cards complement this trend.
Today, payment with EMV chip cards is the norm. Visa reports 97 percent of overall American payment volume in March 2018 was on EMV chip cards. More than 855 million chip cards have been issued to U.S. consumers already.
When a consumer uses a credit card with an EMV chip, if fraud does occur on that transaction, and the merchant does not have EMV equipment to process that EMV card, the liability is placed on the merchant. Otherwise, if both the merchant and cardholder use EMV technology, consumer losses fall back on the payment processor or issuing bank, depending on terms and conditions.
All new cards issued come with EMV chips. Consumers should stop using their magnetic stripe cards and use the new EMV chip cards to stay protected.
As mentioned, the liability falls on the merchant if EMV equipment is not present during an EMV chip card transaction. Having to be accountable in case of fraud is reason enough for most businesses to make the switch.
Other reasons are:
The longer your business waits to switch, the more you risk with every transaction. Get more information on EMV terminals here.