Merchants, credit card processors, banks and merchant services providers are all buzzing about three letters: EMV.
Why are so many people suddenly talking about these letters? On Oct. 1, a major shift is coming to the way businesses, banks and payment processing companies handle credit card transactions.
It’s important for merchants to understand what EMV means and how it affects them. Here are five crucial facts you should know about EMV.
1. EMV Stands For EuroPay, MasterCard, Visa
These three worldwide leading credit card brands came together in the early 1990s to develop a plan for preventing a growing problem: credit card fraud. Eventually, they unveiled a new type of payment card that enabled greater fraud prevention by replacing the stripes common on most cards with a microprocessing chip that creates a unique cryptogram (or secret code) for every transaction.
These cryptograms make it much more difficult for data thieves to steal customers’ credit card information as it gets transmitted from a merchant’s cash register or POS terminal to the merchant’s acquiring bank. Due to the embedded chip, these cards became colloquially known as chip and pin credit cards.
2. EMV Adoption Has Been Slow In The United States
Over time, most countries have adapted to the new EMV-recommended payment technology. The United Kingdom, the European Union and most of Asia are now fully integrated with the technology, which has been remarkably effective in preventing credit card fraud.
Despite its fraud prevention effectiveness, EMV has been very slow to catch on in the United States. In 2007, at the urging of the major credit card brands, payment technology companies began marketing machines that were compatible with chip and pin cards. However, very few businesses purchased them.
Tired of slow adoption rates and having to cover the cost of $1.3 billion in counterfeit credit card fraud, the major credit card companies finally set an EMV compliance deadline for U.S. merchants in the form of the EMV liability shift.
3. The EMV Liability Shift Deadline Is Coming Very Soon
The EMV liability shift happens on Oct. 1, 2015 and has major financial consequences for merchants and retailers. Previously, when a customer’s credit card data was stolen, the credit card companies covered the cost of any fraudulent transactions that were approved on the card.
This will all change starting Oct. 1, when credit card companies shift the cost of the fraudulent transactions to merchants and their processing banks. Merchants that haven’t acquired the necessary technology to process chip and pin credit cards are going to be liable for any fraudulent transactions they process that the chip and pin technology would have prevented.
4. EMV Affects All Brick-And-Mortar Businesses That Accept Credit Cards
Due to the serious financial risks of not complying with EMV, all brick-and-mortar businesses need to become compliant if they have not already. Card-not-present-only and e-commerce-only businesses are not affected by EMV. Gas stations have until Oct. 1, 2017 to become compliant.
5. Upgraded Payment Technology Is The Key To EMV Compliance
To avoid the serious financial impact EMV could have on their bottom line, merchants need to ensure they have payment technology that processes chip and pin cards. High-quality, state-of-the-art machines like the Clover™ POS terminal accept these cards and protect businesses from the consequences of the EMV liability shift.