Liability for US card-present card fraud changes in 2015
What US merchants need to know about EMV now The US payments industry has been chugging along on old technology while the rest of the world has implemented EMV card technology for more than a decade. As recent data breach headlines in the US suggest, criminals focus on the easiest targets and right now, that is the US. But not for long. In order to avoid potential liability while ensuring customer transaction security, many merchants plan to implement EMV technology. As a country, the US is moving toward the EMV standard as a direct result of the payment networks shifting specific fraud liability to merchants starting on October 1, 20151 . What do merchants need to know?
What is EMV?
EMV is a joint effort between Europay, MasterCard® and Visa® to improve payment safety through better card security and improved standards. Countries that have implemented EMV have seen card fraud plummet. Why? EMV cards provide improved security compared to the traditional magnetic stripe cards.
• Microprocessing chips embedded in EMV cards generate a unique number for each sales transaction making it extremely difficult to use a cloned card on a card-present transaction
• Magnetic stripe cards use static data that can be stolen and reused for fraud
• Plus, introducing chip cards in the US not only improves card security, but EMV also helps usher in the new technology and capability for contactless transactions
EMV in the US
Need more reasons to make the EMV POS system upgrades to your business? All major card brands support EMV because it:
• Reduces the criminal attractiveness of card fraud. When card-present card fraud becomes too difficult, criminals move to easier targets
• Creates common cardholder experience. Moving to the EMV standard in the US will make it easier for US travelers using cards abroad. Likewise, international travelers will have peace of mind when conducting transactions here
• Reduces chargebacks due to counterfeit or stolen cards. Fewer chargebacks save merchants time and reduce the frustration typically involved with the chargeback process
• Helps merchants avoid the potential liability for cardpresent card fraud
Why do merchants need to care about EMV?
Implementing EMV will help merchants reduce the risk of being held financially responsible when card-present counterfeit fraud liability shifts to merchants next year. Under the new rules, liability falls to the party with the least transaction security. Businesses with nonEMV compatible terminals will generally be held accountable for some of the associated costs of card fraud starting October 1, 2015. Petroleum businesses, specifically automated fuel dispensing payments at the pump, are the exception as some liability shifts for these types of transactions will not occur until 2017.
Change is coming
EMV cards will include hybrid features (magnetic stripe on back and chip on front), and the process to complete a transaction will change. See below for a comparison of how magnetic stripe cards are presented and processed for payment now vs. how EMV chip cards will be presented and processed for payment in the near future. The silver lining is that these changes will increase security and reduce the likelihood of fraudulent transactions.
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