What the Transition to EMV Chip Cards Means for You
Credit card fraud is an ongoing concern for both small and large businesses. Recent data security breaches at large retailers have increased awareness of the problem and ignited a debate on ways to prevent this type of crime. One solution supported by President Obama is the transition to EMV chip technology. Businesses accepting credit cards will need to become educated on the use of chip cards and make necessary hardware upgrades in order to continue to safely accept this form of payment.
What is EMV Chip Card Technology?
EMV, which stands for Europay, MasterCard® and Visa®, chip technology has existed since the 1990s. Cards using this technology gained popularity outside of the United States and have been a factor in reduced fraud overseas, but hadn’t gained much traction in the United States until the president’s recent legislative push.
They work like this: EMV cards have a small chip embedded into the plastic. The chip secures customers’ data better than the traditional magnetic stripe by generating a unique, single-use transaction code with each payment. In the event of a security breach at the point of sale, the data stolen from an EMV chip would not be able to be used to make additional purchases, whereas the information stolen from a magnetic stripe could be used many times by a hacker.
Approximately 575 million chip cards are expected to be issued to U.S. consumers by the end of 2015. To assist with the transition, newly issued credit cards will still carry the magnetic stripe in addition to the chip and will be functional in both the older swipe terminals and the newer chip readers.
Fraud Liability Shift
Prior to the new initiative, monetary losses resulting from fraudulent credit card use were absorbed by credit card banks and payment processors, not the merchants. After October 2015, however, merchants will accept some liability for fraud losses if they fail to upgrade to chip card terminals, or if they do upgrade but continue to process chip cards by swiping the magnetic stripes.
Small businesses should understand the new payment procedures to ensure that chip cards are properly read and payment accepted. Questions about the new EMV chip technology can be handled through a businesses’ payment processor.
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