Effective Oct. 1, 2015, the question of who is liable for card-present fraud in a transaction --- the issuing bank or the merchant – will come down to who is the least compliant with the new EMV chip card standards.
EMV stands for Europay, MasterCard® and Visa®. This technical standard is designed to ensure that microchip-embedded payment cards are compatible with the terminals of merchants who accept them. Chip-embedded payment cards are nearly impossible to duplicate — when combined with additional layers of security like encryption, tokenization and other strong authentication techniques, EMV significantly reduces opportunities for card payment fraud for face-to-face transactions.
EMV was introduced in Europe in 1993. Since then, most countries have adopted it. The United States is the last major world economy to migrate to EMV. The U.S. migration was launched in 2012, culminating in this liability shift in October.
Research has shown that many small businesses were aware of the new requirements but did not know the details and are scrambling into action. For its part, PNC Bank’s merchant services division started a series of communications several years ago. We followed it up with reminders and conversations with our business banking customers.
Alex Martinez, director of the Huron Valley Consultation Center in Ann Arbor, Mich., is one example of a small business that is prepared. He received a follow-up mailing early in 2015 from PNC and then Deb Neal from the bank’s merchant services team walked him through the process with the EMV chip card terminal.
"For a business like ours, safety, security and privacy are of the utmost importance so we want to be on the cutting edge of the technology when it comes to payments,” Martinez said. “The process was very easy, and Deb helped us through it from the beginning."
For a small business, the investment in chip card technology varies based on the complexity of the point-of-sale setup. Some terminals can be upgraded with the addition of a PIN pad, which is a minimal investment compared to the cost of the sophisticated systems at larger retailers.
Cards with magnetic stripes are swiped while EMV chip cards are dipped (inserted) in the chip-enabled terminals. The chip enhances card security for electronic payments because it generates a unique transaction code, which is shared with the merchant. This makes the card difficult to copy.
These new terminals enable merchants to accept EMV chip card payments along with other payment options. This includes both contact and contactless transactions, like tapping or waving the card instead of inserting it.
Starting in May 2015, PNC began issuing chip-enabled cards to consumer customers and then later to small business customers. Cards are being replaced as current cards expire. Since all cards won't expire at the same time and/or by Oct. 1, we expect the distribution process will extend into 2016.
While the migration to EMV chip cards in the near term may hit a few snags, experts say that this will be more than offset by the long-term benefits in terms of reduced card payment fraud. For example, after Canada migrated to EMV in 2009, losses due to credit card fraud fell from $142 million to just $38.5 million three years later.
David Shorten is the general manager and senior vice president of sales for PNC Merchant Services and segment executive for PNC’s business banking treasury management unit.
David Shorten says new terminals enable merchants to accept EMV chip card payments plus other options
Source: American Bankers Association
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