Are You Ready for EMV? October 1 Important Date

July 10, 2015

EMV is an acronym that stands for an organization formed by EuroPay, MasterCard and Visa to create standards for card-present transactions. To provide added security against fraud from counterfeit and lost or stolen cards, EMV uses a computer chip on credit and debit cards -- instead of the traditional magnetic stripe -- to process face-to-face payments.

While EMV is neither a mandate nor a compliance requirement, upgrading to an EMV-enabled solution can significantly protect your business from fraud losses. This standard has been implemented in most regions of the world over the past 20 years and has proved to be a highly successful deterrent to fraud.

The entire payment industry will benefit from a dramatic reduction in fraudulent transactions, since hidden costs such as fraud losses are incorporated into the cost of goods and services.

Why is October 1, 2015 an important date?
On October 1, some of the liability for certain types of fraudulent transactions will shift from card issuers to merchants who accept face-to-face card payments and have not upgraded their equipment to accept the new EMV cards (also called smart cards or chip cards) when an EMV card is presented. If the card presented is not a smart card, then the change in liability is not affected.

What does my organization need to know about EMV?
Organizations that accept credit or debit cards must upgrade their equipment to accommodate the new smart cards to avoid the upcoming liability shift, which will apply to card-present transactions processed from POS terminals, mobile SmartPhone/tablet applications, and virtual terminal or integrated POS systems.

How is EMV specifically affecting card- present payments?
EMV will require point of sale devices to have a slot that enables the chip card to be inserted and read during a payment transaction. The card is inserted into the slot on the POS device when prompted, and data from the chip is transmitted and analyzed by the issuer as part of payment authorization approval processing and end of day settlement. Data is written back onto the card as part of the payment approval, ensuring that ongoing use of the card remains secure. It is a multi-faceted change to the way card-present payments have been processed with traditional magnetic stripe cards.

Card-Not-Present payments are not affected at this time. This includes recurring payments, or any transactions where a purchaser is not physically presenting a card for payment.

What do I need to become EMV ready?
EMV will require card reader hardware that accepts chip cards, and software that processes the data from and to the chip. If your current payment solution includes EMV-capable card reader hardware, you may only need a software download to start processing EMV cards. Otherwise, both hardware and software upgrades may be required.

What are the benefits of EMV cards to merchants and consumers?
EMV secures payment transactions with enhanced functionality in three areas: card authentication, cardholder verification and transaction authorization. Unlike a magnetic stripe card, it is virtually impossible to create a counterfeit EMV card that can be used to successfully conduct an EMV payment transaction. EMV will also strengthen cardholder confidence in merchants who use EMV solutions, and merchants may realize increased business from foreign cardholders whose cards must be processed via their chips.

What if I don’t upgrade to an EMV solution?
As of October 1, merchants will become liable for fraud-related chargebacks for face-to-face transactions from cards that have chips on them, if the transaction was completed on a non-EMV certified terminal. Historically, these fraud losses have been absorbed by the card issuer. As EMV becomes the new security standard in the marketplace and consumers become more familiar with it, your business may erode due to lack of consumer confidence in your payment security,

What card issuers are part of the EMV change and when will cards have the smart chip?
EMVCo is owned by all of the major card brands. Several major banks, payment processors, retailers, payment hardware and software providers and stakeholders comprising all aspects of the payments industry are also involved in and endorse the EMV initiative. The EMV change coming later this year applies to all card brands, but there will be issuers who choose to issue chip cards to their cardholders only when current cards expire, or on their own timetable. So, all cards may not have a chip on them by the end of 2015.

Contributed by Vanco Payment Solutions. Through the Michigan Chamber’s partnership with Vanco, you have the opportunity to accept credit, debit and other electronically based transactions at just 0.2% above cost. Email Vanco Payment Solutions or call them at 866-944-0055 to learn more.