“The chip cards are coming! The chip cards are coming! By land and by sea.
Organize the merchant militia!”
If you haven’t already heard, the instatement of EMV cards is imminent in the
US. Suddenly all of those sales pitches from agents over the past few years
( “You really need this future-proof terminal” “EMV cards are the future, you
might as well upg rade now”) are beginning to sound less like pushy gimmicks
and more like ignored prophecy, with your soon-to-be useless credit card
machine hanging around your neck like the mariner’s albatross.
It’s not all gloom and doom, though. Yeah, a lot of merchants are going to
need to upgrade soon (maybe a good time to buy stock…), but the real
headache is going to be for the merchant service providers who need to make
sure all of their clients are using the right equipment and convincing the clients
that an upgrade is necessary. There’s a little bit of The Bo y Who Cried Wolf in
this scenario: We’re constantly bombarded with the upsell ( Would you like
fries with that?), so we’re wary of this sort of thing, especially from payment
processing companies, who most of us regard as on par with used car or
insurance sales reps (no offense to these professions).
But I’m here to give it to you straight. Yes, you really do need a new fancy
credit card machine soon. It’s not the end of the world if you don’t start
running with the rest of the lemmings right away, but you will be at greater risk
for fraud liability if you process a counterfeit chip card come October 2015.
Also, at some point your processing company can and will force you to
upgrade, so check out the video and sign up right away for free equipment.
What is an EMV Chip Card and Why Do I Care?
For starters, EMV stands for “ Europay, MasterCard and Visa,” which set out to
create world-wide standardized protocols for so-called “integrated circuit”
cards and the hardware necessary to accept these cards. This was no easy
task, but by 2005 – almost a darn decade ago – chip cards became status
quo in the EU. By 2012, Canada also joined in on the EMV party.
These cards are manufactured with a small integrated circuit (or “chip”) in the
card. Payment data is read from this chip instead of from the magnetic stripe.
This protects against fraud in two ways. First, the chip itself is more difficult
and expensive to counterfeit. Second, the way the data is transmitted varies
each time it is read, making it dynamic instead of static. Thus, while info from
a magnetic stripe can be “skimmed” easily, chip information is much more
complicated to glean.
While the effectiveness of EMV cards in thwarting fraud is debated (it does
nothing for card-not-present fraud, for instance), this is kind of beside the point
as far as we are concerned. We don’t get to decide; we just have to obey. The
good news is that the EU and Canada and basically the rest of the developed
world were the guinea pigs here, so the US should have a smooth transition in
theory. (Is the metric system next?)
You Can’t Make Me (Right?)
So I know what you’re thinking, “Who’s gonna come here and force me to do
this? I don’t have to if I don’t want to.” And, in essence, you are correct. If you
want to keep on processing cards with the magnetic stripe and say screw it to
the whole EMV protocol, you are currently free to do that. You won’t lose any
business, since smart cards still have a magnetic stripe as a back up. You will
not be fined, and your transactions will still process as usual. But there will be
one incredibly important difference: Starting in October 2015, you and your
processing company will be liable for any counterfeit smart card
transactions. This is what they call a “liability shift.” Since having the EMV
terminal could have theoretically prevented the fraud, the liability is now on
acquirers and merchants (you).
The Timeline for EMV Chip Card Liability Shift in the US
? April 19, 2013 – Maestro shifted liability for international chip cards
used in the US.
? October 1, 2015 – Visa, MasterCard, American Express and
Discover liability shift for POS terminals.
? October 1, 2016 – MasterCard liability shift for ATMs.
? October 1, 2017 – Visa, MasterCard, American Express and
Discover liability shift for pay-at-pump gas stations, as well as for
Visa and AmEx at ATMs.
So, as you can see, October 2015 is the big date most merchants need to
keep in mind. By that point, your processor will probably have already forced
you to upgrade in order to protect itself against fraud liability.
“But no one is using chip cards, this doesn’t even matter.”
Well that might be true today, but the times, they are a-changin. Get ready to
see a massive increase in chip cards at your register as the card networks
begin to make the switch. You may not be able to take the cards any other
way in the future.
What Should I Do About Smart Cards Now?
At this point, you should be seriously thinking about it. And I do mean
Make no mistake – you really do need to protect yourself from fraud liability.
The few hundred dollars a new terminal will cost you is worth the peace of
mind. However, this is America, the land where we have the right to make our
own choices, however stupid, and you are also free to roll the dice if you
prefer (and your processing company allows you to). After all, there is always
the chance that no one will ever present a counterfeit chip card at your
register. Is it worth the worry to save a little cash? If you’re Scrooge McDuck,
maybe. For me, no.