EMV Compliant? The Way Consumers Pay is Changing

What is EMV and Why the Move?

EMV is a global payment standard for secure credit and debit card processing named after its original creators Europay, Mastercard and Visa.

We are all familiar with the traditional magnetic stripe on the back of payment cards, but you may have noticed, or begin to notice, a small metallic square on newer cards. This metallic square is an embedded secure chip utilizing EMV technology to perform processing functions and securely store confidential information. When connected to a chip reader in an EMV-compliant terminal or device at the point of sale, the EMV chip and terminal work together to process a secure payment transaction.

While the use of EMV cards may appear relatively new to us in the United States, EMV chip technology has been used globally for almost 10 years in an effort to reduce credit card fraud resulting from counterfeit and lost and stolen cards. Whereas the well-known magnetic stripe on cards stores unchanging data that is easy to replicate, EMV cards (also referred to as smart cards or chip cards) validate the card being processed is genuine each and every time it is used by creating a unique transaction code that cannot be used again. There are two authentication methods associated with EMV cards depending on the specific terms set forth by the card issuer – Chip and PIN, requiring the cardholder to enter a PIN number for authorization; and Chip and Signature, requiring the cardholder to sign in order to authorize the transaction.

What Does This Mean for Me as A Merchant?

Before October 1, 2015, if a payment transaction was processed using a fraudulent card, the payment processor or issuing bank assumed responsible for consumer losses from that transaction. Beginning October 1, 2015, the burden of card payment fraud is shifted to whichever party is the least EMV-compliant in a fraudulent transaction, including the merchant.

As a merchant, this means as of October 1, 2015, you will be expected to have the proper hardware and payment systems in place to process payments made with EMV cards. If you do not, and you swipe the magnetic stripe on the back of an EMV card instead of “dipping the chip,” as it is called, on an EMV compliant device, the burden of credit card fraud will fall on you as the merchant.

Note (updated March 1, 2016): Intuit originally extended the EMV liability shift by six months for all QuickBooks Payments customers to allow more time for merchants to make the transition. However, Intuit announced in late February/early March of 2016 that if you are a QuickBooks Payments customer and unknowingly accept a counterfeit EMV card using your magnetic stripe reader, Intuit will assume your liability for the fraud until further notice.

Becoming EMV Compliant

At the very least, merchants will need to purchase or upgrade to EMV-compliant terminals or devices at each point of sale station, including mobile. Merchants may also have to look at upgrading computers and/or the POS versions used depending on compliance levels and EMV compatibility associated with each. Sepulvado Consulting Group can help you determine the upgrades needed to enable EMV compatibility as well provide the proper EMV-compliant terminals for QuickBooks and QuickBooks Point of Sale.

Other things to consider include training your employees on how to process EMV cards – what do they look like, fallback procedures, terminal behavior and the new prompts for both the cashier and the customer. You should also promote the fact you are EMV-compliant and have the ability to accept secure EMV payments.

In Summary

While EMV cards are designed to replace magnetic stripe cards, the magnetic stripe is not going away anytime soon. EMV cards will continue to be equipped with the magnetic stripe for backwards compatibility to ensure consumers the ability to use their card wherever they go. However, as a merchant you do not want to be on the low end of the totem pole in a fraudulent transaction and carry the burden of that fraud. Therefore, it is important to protect yourself from liability and take the necessary steps to become EMV compliant.

For more information, please contact our office.