Editor’s Be aware: That is “Half 1” of a 2-part collection.
This text is principally for brick-and-mortar retailers. The upcoming October 2015 rule modifications concerning EMV-enabled bank cards are particular to card-present retailers. However ecommerce retailers ought to perceive what EMV entails, as some service provider account salespeople have tried to use EMV to card-not-present accounts, corresponding to ecommerce transactions.
I’m scripting this as a result of I discussed EMV playing cards in “B2B Retailers Typically Overpay for Card Processing,” my November 2014 article. That generated questions and considerations from brick-and-mortar retailers in regards to the EMV misinformation being distributed by some processors and salespeople.
Subsequently, the purpose of this text is to make clear how acceptance of EMV playing cards and the upcoming rule modifications will affect card-present retailers and the choices they should make earlier than October 2015. (For a background on EMV, learn “Credit score Card Processing: October 2013 Charge Modifications, EMV Terminals,” my article from 2013.)
What Is ‘EMV’?
You might have seen {that a} excessive share of newly issued credit score and debit playing cards within the U.S. now have a microchip embedded within the plastic. Whereas this chip is new to the U.S., playing cards issued in lots of different international locations have had an embedded microchip for years. The aim of the microchip is to scale back the worth of stolen card information and the benefit of conducting counterfeit transactions.
EMV-enabled bank cards have a microchip inserted within the plastic. Supply: Visa.
EMV stands for “EuroPay, MasterCard, Visa,” that are the three firms that initially developed the requirements for chip card processing. Within the bank card trade EMV is synonymous with the principles governing acceptance of chip card transactions. These guidelines make chip playing cards and point-of-sale units suitable all over the world.
The cardboard firms notice that the magnetic stripe know-how used on U.S. bank cards for the previous few many years not has sufficient safety. To conduct a fraudulent transaction, criminals want solely the data discovered on the magnetic strip. This data will be skimmed off a person card with a primary machine or it may be obtained in mass portions by hacking into service provider and supplier databases. For this reason service provider adherence to PCI DSS — Cost Card Business Knowledge Safety Requirements — is so essential for the cardboard firms.
Embedding a microchip on the cardboard supplies an essential additional stage of safety to scale back the worth of stolen card information. The chip permits cryptographic processing. whereby every transaction has dynamic, distinctive authentication. This reduces the opportunity of a fraudulent transaction. Nevertheless it signifies that U.S. retailers should have point-of-sale units that may course of the encrypted data for this additional stage of safety to work.
EMV: What U.S. Retailers Must Know
There’s a lot misinformation from some service provider account suppliers about EMV. Sadly, some retailers that don’t even course of EMV playing cards are actually shopping for and leasing tools from these suppliers. Right here is the data retailers have to find out about EMV and the October 2015 rule modifications that have an effect on card-present retailers.
At the moment, most card-present counterfeit card losses are the duty of the financial institution that issued the cardboard. Nonetheless, on October 1, 2015 the cardboard firms are altering the principles. As of that date, the entity chargeable for the EMV data will probably be held financially chargeable for sure card-present counterfeit losses. That signifies that if the financial institution issued a card with out the microchip, it could be chargeable for any card-present fraudulent card losses. Nonetheless, if the cardboard had the microchip and the supplier didn’t course of the data, then the supplier could also be chargeable for any losses.
What retailers want to grasp is that the supplier will cross any such loss onto the service provider if the service provider didn’t have tools able to processing the EMV data.
Additionally, perceive that chip playing cards will nonetheless have the magnetic stripe on the again of the cardboard, so retailers with out the EMV POS units can nonetheless course of transactions. The cardboard firms usually are not forcing retailers to spend money on POS units that may course of an EMV transaction. Nonetheless, they’re utilizing a fairly large stick by way of the counterfeit fraud loss rule modifications to encourage retailers to spend money on POS units that may course of EMV transactions.
Settle for Monetary Accountability, or Not?
Subsequently, each card-present service provider must decide: Does it need to tackle the duty for counterfeit card losses or does it need to spend money on tools that may course of EMV transactions? Companies ought to make this choice properly forward of the October 2015 deadline, to make sure they will acquire the wanted tools if obligatory.
Nonetheless, there are extra choices every service provider might want to make ought to it spend money on the EMV tools. Retailers have to resolve in the event that they need to incorporate NFC (close to subject communication) or Apple Pay and different such applications that enable the shopper to put the cardboard or cellular phone close to a receiving machine to acquire the chip card data, versus inserting the cardboard within the POS machine. Retailers additionally want to grasp that some card issuers might require cardholders to key-in a PIN quantity with the chip card transaction and a few issuers might solely require the signature. Because of this a service provider might have to spend money on an EMV PIN pad because of the location of the POS machine so the shopper has some privateness when inserting her PIN quantity.
I’ll deal with this and different choices retailers have to make in subsequent month’s article — see “EMV Credit score Playing cards, Half 2: Level-of-sale Units, Alternate options.”
