EMV chip cards are becoming the new normal — and they’re certainly the way of the future — but does your business really need to switch to EMV-compliant terminals yet? The majority of consumers now have chip cards in their wallets, but some merchants are still grappling with the decision of whether or not to invest in a new set of terminals that accept cards with EMV technology.
Chip cards were introduced in the United States during a time of rising credit card fraud and large-scale data breaches. Their intent is to block these types of events from occurring, offering protection to both consumers and merchants. But how does this work and what kind of protection do chip cards offer?
What is EMV technology?
Short for EuroPay, Mastercard, and Visa, EMV technology was created by these companies in an effort to set new security standards for card payments. EMV cards have been the dominant card technology in Europe and Canada for decades, and they have now been adopted — albeit at a slower rate — around the world as well.
EMV cards each contain a small, metallic computer chip that houses more powerful technology than traditional magnetic stripe (or mag-stripe) cards, making them safer for consumers to use.
Did you know that mag-stripe cards are pretty easy to clone or counterfeit? For years, fraudsters have used skimming devices to copy card info onto blank cards for their own malicious purposes. This was possible because of the static (i.e. never-changing) data embedded in the mag-stripe.
Enter EMV chips. They’re much harder to clone because the dynamic chip generates a unique, one-time code for every individual transaction — big and small. Even if a fraudster manages to clone a chip card during a transaction, that code would no longer work for another attempted purchase.
Since its introduction, EMV technology has helped drastically reduce instances of card-present fraud. Visa and Mastercard have both reported over a 50% decline in counterfeit fraud rates in the US due to EMV adoption. Minimizing the chances of fraudulent transactions from occurring in the first place is beneficial to both consumers and merchants.
(Note: EMV technology is not designed to prevent data breaches. Other payments technologies like encryption and tokenization can help in that arena. Read more about comprehensive payments security on our blog.)
Accepting EMV cards
Before your business can begin accepting chip cards, you’ll first need to invest in EMV-compliant point-of-sale terminals. You’ve seen these terminals around in various shapes and sizes; they’re the ones that ask you to dip a card rather than swiping.
EMV terminals can be broken into two general categories:
- Mag-stripe and EMV: This type of terminal will accept older mag-stripe cards and newer chip cards. Because they often have a simpler design and require less hardware, these terminals are generally the cheaper of these two categories.
- Mag-stripe, EMV, and NFC: In addition to all cards, this type of terminal will also accept contactless NFC payments like mobile wallets. These terminals support technologies that are likely to soon dominate the US payments industry, branding them as “future proof.”
Mobile payment processing has been slower to adopt EMV technology than in-person POS systems. But hardware manufacturers are now producing mobile chip card readers that can connect to any mobile device via Bluetooth.
EMV and security/liability
The card associations and banks faced a challenge when they started issuing chip cards: they began the process of bringing the US in line with global EMV standards, but that does little good unless merchants update their hardware to EMV-compliant solutions.
In an effort to encourage merchants to make the switch, the card networks and banks agreed to stop taking on the costs of fraudulent transactions that EMV cards and terminals could have prevented. This went into effect in October 2015, and it shifted the liability of fraud to from financial institutions to merchants.
Since that cutoff date, any merchants that have not yet switched to EMV terminals are responsible for the costs associated with fraudulent activity (reimbursements, merchandise replacements, chargebacks, etc.).
While there is no law that demands merchants use EMV terminals, not making the switch puts businesses at risk. The cost of fines, liability, and a tarnished reputation could prove to be much higher than that of making the upgrade to EMV terminals.
Investing in and installing EMV terminals is the responsible business decision, boosting payments security and helping to win consumer trust.
Has your business made the switch yet?