EMV is Coming
Understanding the Basics: EMV is Coming
Across the world, a wave of change has transformed the way fuel marketers and other retailers conduct their business. “EMV” may be an alien concept to many Americans, but by this October, this payment shift will be effective at most inside payment terminals.
EMV represents an effort to reduce payment card fraud. In the U.K., card fraud is reported to have dropped by 40% after the introduction of EMV. (Financial Fraud Action U.K., Fraud, the Facts).
EMV endeavors to create a global standard for payment security using something called Dynamic Data Encryption (DDA). Through DDA, a chip embedded in the card communicates data through a process called “tokenization.” In milliseconds, data is encrypted, transmitted, analyzed and verified – or rejected.
The standard has been rolled out globally and is used in most other markets. In Western Europe and Canada, EMV transactions are approaching 95% of retail transactions. EMV transactions are also growing rapidly in Asia, Eastern Europe, and South America. (NFC World, Nov. 2014).
In the United States, there are two important deadlines to be familiar with: by October 1, 2015, all in-store terminals should be ready to accept EMV cards; and by October 1, 2017, pay-at-pump terminals must be compatible.
The major cards are using “liability shift” to encourage the change to EMV. After the deadline dates, fraudulent transactions using magnetic strip equipment become a potential liability to the merchant.
Here is how Visa explains the liability shift:
| Credit Card Payment Transaction Scenarios | |
| Mag stripe card @ mag stripe terminal | Merchant generally not liable |
| Chip card @ mag stripe only terminal | Merchant generally liable – issuer has upgraded cards to EMV and merchant has not invested in upgrading |
| Chip card @ chip-enabled terminal | Merchant not liable as an EMV card was used at an EMV terminal. |
Source: http://usa.visa.com
EMV will, for some marketers, require a significant level of investment. We welcome the chance to discuss with you the best options for you to optimize your financing as you consider the scope and timing of your investments.
This blog was written by Chris Santy, President, Patriot Capital and originally appeared in the Below the Line Club January 2015 Newsletter. This article is intended to provide an introduction to payment and the EMV liability shift for indoor payment and unattended payment terminals. We recommend consulting with your payment processing network and marketing brands for specifics related to your business situation.