Preparing your Business for the EMV Liability Shift

With summer approaching, many merchants are happily awaiting a boon in business as customers flock to spend their hard earned dollars on everything from vacation goodies to back-to-school supplies. Unbeknownst to most of the American consuming public, though, is the change in how the process of handing over those dollars is primed to change just as school starts up for those school supplies to be used. EMV is coming, and while consumers may be surprised at their credit card facelifts, merchants cannot afford themselves the same surprise.

EMV Explained

EMV, which stands for EuroPay, MasterCard, and Visa, is a standard for authenticating credit and debit card transactions. First introduced in 1992, and now widely used outside the U.S., particularly in Europe and Asia, EMV requires replacing traditional magnetic swipe cards with microchips.

Microchip cards and POS machines are those seen all over Europe that require customers to insert cards into a slot where the chip in the card is read. A large part of the switch is due to issues arising from fraud and the relative ease with which the static information in the magnetic strip on traditional magswipe cards can be duplicated or stolen. Chip cards create a one-off code for each transaction, making each use unique. This greatly decreases potential fraud.

The U.S. accounts for nearly half of the world’s credit card fraud each year. Much of that is due to a historic aversion to changing the magnetic strip standard of credit card processing, a process that has been used for the better part of four decades. U.S. merchants and retailers have been encouraged to transition to EMV cards for years now, but have had the option to consistently push off the decision to another day. That choice will soon be a costly one.

Why Should You Care

While the rest of the world adopted EMV years ago, U.S. merchants and consumers alike shied away from making the switch. That choice was based largely on the cost of replacing current systems with new ones. More often than not the only time consumers wanted chip cards was when they realized how often they may be inconvenienced when traveling abroad. So the system remained unchanged. But, not for long. In October 2015 most consumers, buying domestic or abroad, will have a microchip in their wallet or NFC capable phone. The reason: a liability shift from credit card issuers to issuers, merchants and processors alike.

While the option to use EMV has been around for over two decades, there was no real incentive for merchants to upgrade POS systems to accept microchip credit cards. That changes in October 2015. The fraud liability shift will place financial responsibility for fraudulent charges on whichever party (Merchant/Processor/Card Issuer) is responsible for the chip transaction not occurring.

Long story short, like it or not, EMV is happening stateside. If your business doesn’t have the ability to accept microchip transactions and you incur fraudulent charges, you alone are on the hook for the bill.

Prepping Your Business

There are three possibly liable participants in the process. Merchants, processors, and card issuers can all foot the blame for a fraudulent transaction. Your initial job as a merchant is one-fold; you need an EMV compliant terminal.  After accepting that reality, there are other choices to make like what type of payments to accept and who should be taking care of your credit card processing as you transition to the new system.

Regardless of your readiness to accept EMV payments, come October 2015 you will become liable if you incur fraudulent charges as a result of breaking the microchip chain. As a retailer, your first order of business is making a plan.

Contact your merchant service provider to find out what their plans are for the October liability switch. Make sure their plans align with those of your business. Ask questions; Write down answers. This also provides you with a great opportunity to review your processing statement, and determine whether your business is currently working with the best processor possible.

Next, take a look at the specific options for EMV transactions. You’ll need to decide which process your business will employ. There are four potential EMV transaction processes:

Contactless payments use NFC enabled cards and smartphones for customers to pay by tapping their cards and signing or entering their PIN. Chip and PIN and Chip and Signature payments involve customers inserting their cards into a POS and either entering a PIN or signing. The latter is most similar to the current U.S. swipe and sign process of magnetic strip cards. Chip Only transactions are usually reserved for purchases under a specific limit and require neither a PIN nor signature.

Finally, make an itemized roadmap for the months leading up to the transition date, so your business is ready for EMV payments BEFORE the October 2015 deadline. Choose the right merchant service, talk over the steps for transitioning from mag-swipe cards to microchip, and create a plan. Come autumn you’ll be glad you took the steps that let you solve all your go-live issues before future liability became present day reality.

Editor’s Note: In addition to currently being our recommended processor for their pricing and support, Cayan is currently in the midst of a major rollout to make sure all of their merchants are EMV ready before the deadline. You can speak with a sales rep at (866) 840-7686 or fill out a form at http://www.cayanrequestaquote.com/ to have them contact you.

About author

Michael Barry
Michael Barry 31 posts

Michael Barry is the Editor-In-Chief at AgeOfTheSmallBusiness.com. Currently living in Boston, Massachusetts, he received his B.A. in Financial Economics from St. Anselm College and his MFA in Creative Writing from the Stonecoast Program at the University of Southern Maine.

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  1. […] Preparing your Business for the EMV Liability Shift With summer approaching, many merchants are happily awaiting a boon in business as customers flock to spend their hard earned dollars on everything from vacation goodies to back-to-school supplies. Unbeknownst to most of the American consuming public, though, is the change in how the process of handing over those dollars is primed to change just as school starts up for those school supplies to be used. EMV is coming, and while consumers may be surprised at their credit card facelifts, merchants cannot afford themselves the same surprise. […]

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