The conversion to EMV chip or smart card technology is barreling down on the U.S. who is admittedly a bit behind the rest of the world. We touched on that in our last post on EMV and the global perspective. But the biggest implication for banks and merchants by far is the liability shift. With the impending ‘shift’ taking effect in October of this year it’s important to understand the potential it has to affect your business and you.
What is Liability Shift?
Bottom line: the issue is with the equipment. The issuer (bank, credit union or other financial institution) or merchant who does not support EMV assumes liability for counterfeit card transactions. So when October comes, if you are still using non-EMV compliant devices and accept transactions made with EMV-compliant cards you assume liability for all transactions that are found to be fraudulent. If you have the new chip and PIN technology but the bank hasn’t issued your customer the EMV chip card, the bank is liable. If both merchant and customer have EMV chip technology then the credit card company bears the liability, as it is today. Whew. Got it?
What about card not present transactions?
Credit card transactions processed by phone or online, or card not present transactions, are now at the highest risk of fraud. In fact, the reduction in fraudulent card transactions with a card present has dropped significantly but seems to have driven up the incidence of CNP fraud. And unfortunately, merchants currently bear the costs of CNP fraudulent transactions through chargebacks. Today, however, with increased merchant enrollment in 3D Secure protocol programs and the evolution of technology such as tokenization, fraud and CNP chargebacks are being significantly reduced. At this point, EMV standards and deadlines appear to apply only to POS transactions.
Don’t wait for the looming frenzy
Your current point of sale technology will require upgrade to an EMV capable device for reading the microchip embedded on the EMV cards. If you have multiple POS devices your best option is to create a conversion plan and include training for your team. With the exception of a few major brands including Walmart, Target and Sam’s Club, most retailers seem to lack a sense of urgency to convert. Our advice: don’t get caught in the inevitable frenzy later this year. Get started right now. The new devices are capable of reading both microchip and magnetic stripe so no need to worry about missing a sale.
The details are complex but the conversion is simple. And processing a transaction is simple as well. So don’t let the details get in your way. Call us today to discuss your POS system and your options to beat the deadline.