Merchant EMV Questions
What is EMV?
What is changing?
How does the chip technology work?
How could my business be held liable?
Are merchants required to switch to chip-enabled terminals?
Are there other reasons merchants should have chip-enabled terminals?
EMV chip technology – originally developed by Europay, MasterCard and Visa (EMV) – is now the global standard for credit and debit card payments. It is a fraud-reducing technology that can help protect issuers, merchants and consumers against losses from fraud transactions resulting from theft, skimming and counterfeiting.
The goal in the U.S. is that all debit and credit cards will be issued with chips and that all merchants will convert to chip-enabled terminals. While the full process will likely take a few years, this combination is expected to significantly reduce card fraud at point-of-sale transactions, which has been the case in other countries that have already converted to chip cards. Chip cards already are in use in most of the rest of the world.
Your EMV-enabled device will communicate with the chip inside the customer’s chip card and the payment networks to verify the card and authorize the transaction. Each transaction uses a one-time unique code that can’t be used again. This makes stolen transaction data virtually useless to fraudsters.
This process enhances the authentication of both the card and the customer, reducing the possibility that your business will accept a counterfeit card or be held liable for a fraud-related chargeback.
As of 10/1/2015, if the customer paying at your terminal has a chip card but has to use the magnetic stripe on the back of the card to make the purchase, liability for counterfeit fraud can shift from the issuing bank to the business’ acquirer – who may then pass this fee back to the merchant. This shift in liability encourages chip adoption since chip card transactions on chip enabled terminals provides the additional authentication data that helps to better protect all parties.
The opposite holds true for issuers. If a counterfeit magnetic strip card is used on a chip enabled terminal, the liability for the counterfeit fraud remains the responsibility of the card issuer.
No, it’s not a requirement but it could be costly if they don’t. That’s because of the above mentioned liability shift.
Customers have become increasingly concerned about the security of card payments as they hear more about data breaches and the potential for credit and debit card fraud. In countries where chip cards and chip-enabled terminals have been in use, the incidence of card-present fraud has fallen. Knowing that their transactions and account information are more secure is reassuring to cardholders. The prospect of reducing the costs of card-related fraud should also be an incentive to merchants.