Don’t let EMV fraud liability shift to you Oct. 1.
This is really important.
If you as a vendor do not use active and EMV chip-enabled point-of-sale (“POS”) terminals by Oct. 1, 2015, and counterfeit fraud is committed, your business may be liable for fraudulent transactions when an EMV chip-enabled card is used at your POS terminal. What’s more, according to CreditCards.com, the chargebacks from this kind of fraud can potentially put a small business, out of business.
Generally speaking, the liability shift means that liability for POS terminal transactions will shift to the party with the least secure technology. Liability for transactions other than those occurring at POS terminals (e.g., online or telephone sales) and swipe transactions using the magnetic stripe are not affected by the liability shift in October. The table below broadly describes the liability shift after Oct 1, 2015, for POS terminal transactions only:
The projections from the Smart Card Alliance Payments Summit, held in February 2015, showed that only 47 percent of merchants will be ready to accept chip cards by the end of 2015. The MasterCard, VISA, American Express® and Discover® networks have set an Oct. 1, 2015, deadline for compliance.
Why the urgency? That small metallic square on the latest credit and debit cards is there for one big reason: to reduce the number of counterfeit fraudulent transactions ($10 billion annually) committed against U.S. merchants and customers, says PaymentsLeader.com.
What do you need to know to get ready for the new chip technology?
- Understand how it works: Embedded into the square is an encrypted microchip that is so smart, it generates a new code for each transaction, making it virtually impossible for fraudsters to duplicate and use at the point of sale, according to MasterCard. Known globally as EMV chip technology (after the initials of the company founded by its developers: Europay, MasterCard and VISA), smart credit and debit cards have been successfully used for years by 130+ countries in Europe, Asia, Africa and the Middle East.
According to nerdwallet.com, consumers, not cashiers, will insert their card into an EMV chip-compliant POS terminal and enter a PIN or a signature at checkout. These terminals will lock the card in place the entire time. The liability shift affects these transactions.
- Make a game plan: Determine if your current terminals are EMV chip-enabled. Many already are and haven’t been activated yet. If you find they’re not compliant, contact your payment vendor immediately to figure out the timeframe and cost of transition and plan accordingly. (Note that the new terminals will still accept magnetic stripe cards for a long time.) Learn more about risks and options at 10 things small business owners need to know and the ABCs of EMV chip cards.
- Consider the consequences: In addition to the liability shift, there are still two other important reasons you may want to enable a fast transition to EMV chip technology, says CreditCards.com. First, fraudsters may migrate to retailers who aren’t chip-compliant. Second, customers are likely to avoid using merchants who aren’t protecting their data.
Looking for additional information? Check out www.smartcardalliance.org.