Article: Five Questions Dealers Are Asking About EMV

What is EMV?

Simply put, EMV (also referred to as chip-and-PIN, chip-and-signature, chip-and-choice, or generally as chip technology) is the most recent advancement in a global initiative to combat fraud and protect sensitive payment data in the card-present environment.

An EMV card looks just like a traditional card with an embedded chip in addition to the standard magnetic stripe on the back of the card. What you see on the card is not the actual microchip but a protective overlay. The microchip provides an additional level of authenticity for the transaction.

Watch a 2-minute video that gives a high level overview of the EMV technology:

Will EMV Compliance actually lead to improved security?

credit card securityIn short, yes. Fraud in the Single Euro Payments Area (SEPA) fell 7.6% between 2007 and 2011 after EMV replaced the existing payment technology standards. Card skimming losses alone dropped from $142 million to $38.5 million in the span of a single year (2008 – 2009).

How is this possible? Chip technology is significantly more secure than magstripe card technology because it employs secret cryptographic keys to help protect against fraud at the point of sale and make payment cards more difficult to counterfeit. Modern authentication technology helps ensure the card being used is real and that it belongs to the person using it. It drastically reduces the chances of a business accepting lost, stolen or counterfeit cards.

EMV adoption is already widespread and established enough in markets outside of the US that there is data to demonstrate its effectiveness. Recent high-profile breaches in US retailers have contributed to the sense of urgency underlying the push to adopt more robust security standards and combat a growing trend of card-related financial fraud. The good news is that the new standards are working.

What are the implications of the October 2015 Liability Shift?

EMV complianceMasterCard defines the liability shift this way: The party, either the issuer or merchant, who does not support EMV, assumes liability for counterfeit card transactions. What this means is that those issuers and merchants using non-EMV compliant devices that choose to accept transactions made with EMV-compliant cards assume liability for any and all transactions that are found to be fraudulent.

Today, financial institutions bear the brunt of liability when it comes to fraudulent transactions.

Effective October 1st, 2015, that will no longer be the case. Careful evaluations must be made by retailers of all sizes to determine the potential risk of utilizing non-EMV compliant POS systems beyond this date, as they will be liable for any fraudulent transactions that occur on these systems.

What should I know about the way payment technology is changing?

EMV Device Pax MT30Magstripe payment technology, which has held strong in North America for decades, is on its way out. The European Payments Council (EPC) has started talking about banning it altogether in favor of more secure payment methods. Although the majority of POS hardware is still built to accommodate the familiar swipe-to-pay process, experts anticipate the magstripe cards themselves may vanish within as few as two or three years.

The old cards will be making way for the EMV-compliant chip cards, but more importantly, are disappearing as part of a paradigm shift from “contact” to “contactless” payment. Right now, contact payment is the swipe of that magstripe; with chip cards, the contact will be established by inserting the card into the machine. Chip cards also, however, have the ability to process transactions by holding the card near a reader built into the point of sale. Simply speaking, you tap your card and the payment happens via short range radio signal. This quick payment is especially convenient for consumers making purchases under $50. It hints strongly at the direction that payment technology is trending: contactless and convenient.

This is where mobile payment methods shine. In 2010, the total gross dollar volume of mobile payments in the U.S. alone was $16 billion; some experts expect this volume to rise to $214 billion by 2015.

Mobile AppDid you know that Ideal’s mobile app now streamlines mobile payments? Learn more >

It’s important to be aware of how both consumers and financial institutions are driving change in POS standards, and to invest in solutions that will remain flexible and innovation-friendly during this time of rapid evolution.

What do I have to do as a dealer?

To take full advantage of the EMV secure technology you will need to make a one-time investment in new EMV capable hardware. Start by doing research into the EMV-compliant hardware and software options available to you.

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 Explore Ideal’s Integrated Merchant Services solution >

If you don’t already have an integrated solution, especially when it comes to the connection between your POS and your accounting and inventory software, this is a good opportunity to make that shift. Gaps in your software ecosystem can pose just as much of a security issue as a non-compliant POS system.