Merchants get ready. EMV is finally on its way.
For most of the United States' credit card carrying public, there has not been one iota of thought given to the technology that makes their credit cards work or the security behind it. And quite honestly, most merchants haven't given it much thought either. But that's getting ready to change.
A little background
In the early 1990s, Europay, Mastercard and Visa came together with a common goal of combatting magnetic-strip related fraud. After much discussion and research, the consensus was that chip-based payment cards were the way to go. Thus, EMV was formed. This technology adds an additional layer of security to in-person transactions by generating a cryptogram that is unique to each transaction. The chip stores cardholders' information rather than the traditional magnetic strip.
EMV technology has steadily gained acceptance around the world. In western Europe, merchants have fully adopted it, with over 12.2 million EMV terminals and a 99.9% adoption rate. However, this has not been the case in the United States; only 4.5% of card-present transactions originate from chip terminals.
The impetus for change
On October 1st, 2015, credit card fraud liability is going to be dependent on the usage of EMV technology. What does that mean? Merchants and financial institutions that have made investments in the technology will be spared liability for credit card fraud. Those merchants and institutions that do not make the necessary changes, however, will be held responsible for any card-related fraud.
As you can imagine, this is leading to widespread adoption of the technology. There is no requirement for merchants to support EMV cards, but most are taking the necessary steps in order to reduce their fraud liability.
In the past few months, security breaches have been making headlines. Big-box retailer Target had roughly 40 million debit and credit card numbers stolen. This caused panic among users and a lot of brand damage that Target is still reeling from. In recent weeks, we've seen customer data at PF Chang's and UPS targeted by hackers. It's still a bit unclear if cards enabled with EMV technology would have made a difference in those cases. In the case of Target, the malware was attacking account information stored within the point-of-sale (POS) devices themselves. What is clear though, is that EMV technology does help reduce the value of stolen data.
Global market migrations to EMV have proven that chip technology is an effective tool in combating counterfeit fraud. Users of chip-based cards have to enter a four-digit code on a keypad to complete purchases, adding another layer of security. Industry groups worldwide have reported that credit card fraud dropped sharply after banks and merchants switched to the cards.
What is next?
US credit card companies are planning to issue more than 575 million chip-based cards by the end of 2015. Retailers are following suit by changing their systems. Most of the big box retailers have already installed point-of-sale systems where the new EMV cards can be used. Change is coming. Are you ready?
Contact our EMV technology experts if you have any additional questions on the new regulations or equipment.