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August 6th, 2015

The Switch to Chip Cards - new hardware is needed by October 2015 - are you in compliance?

by Bonnye Sensenig

labeled smart card post it chipU.S. banks are changing the way credit card technology works. They’re adding something called EMV technology, which stands for “Europay, MasterCard, and Visa.” Layman's Translation: Credit cards will be equipped with a micro sized computer chip that’s extremely hard to counterfeit. If you’ve gotten a card recently, chances are it already is using this technology.

Why the changeover? Here is something that will probably surprise you: Nearly half of the world’s credit card fraud now happens in the United States—even though only a quarter of all credit card transactions happen here. The banks want to change this by moving away from magnetic-stripe cards, which are easier to counterfeit. The recent high-profile security breaches at some of the country’s largest retailers have added motivation to make the switch happen as soon as possible.

So how exactly will this affect your business? Most importantly, you will need a new processing device to read the information in the chip cards. And come October 2015, businesses that don’t have an EMV processing device could be on the hook for fraudulent chip card transactions. This is something called the “liability shift,” and it is important to understand how it can affect your business.

So - here is how things are changing:Currently, if you run a fraudulent card, banks absorb the costs. Starting in October 2015, if someone pays with a fraudulent chip card, and you’re not set up with an EMV card reader, the banks will no longer be liable. So say, for example, someone fraudulently buys $30 worth of hot sauce from a restaurant with a counterfeit EMV chip card. If the restaurant doesn’t have a chip card reader to process the transaction, it could be on the hook for the $30.

This is NOT new technology!! Most of the world, including Europe, has used these cards for years.
The United States is actually the last major market still using magnetic-stripe-only cards.

Chip cards are "run" differently than swipe cards. Chip cards are inserted, or “dipped,” into the payment device and left in place for the entire transaction as the reader and card talk back and forth. One thing to know is that EMV transactions actually take a lot longer than mag stripe transactions (several seconds longer, in fact).

BEK recommends purchasing your chip-enabled card reader well before the October 2015 deadline, in order to train your staff on how to use it. Call BEK or your credit card processing company if you have questions and for more information.

 

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