Like any form of payment, business I accept credit cards You face an inherent level of risk. Hackers and thieves find ways to steal customer credit card details so they can charge fraudulent fees for purchases face to face or online.
Fortunately, there are many Credit cards will have zero fraud liability Protection, meaning you will not be hooked due to unauthorized fees posted to your account. Additional protection provided by Fair Credit Request Act (FCBA) We guarantee that we are not liable for fraudulent claims of $50 or more. However, if your business doesn’t have an EMV compliant POS system to accept chip credit cards, that could be a costly mistake.
EMV Compliance: Overview
An EMV card is a smart payment card, also known as a chip card or IC card, that stores data in an integrated circuit rather than a magnetic stripe. Mastercard. EMV stands for Europay, MasterCard and Visa, and refers to three major credit card networks.
Chip cards create dynamic data each time a consumer creates a transaction, making it nearly impossible for a scammer to replicate or clone the card. This adds security to your daily purchases. EMV cards can also store loyalty program information, allowing consumers to earn or redeem loyalty points at participating merchants.
Warning Stories
Daniel Vasquez, owner of Miami-based Dynamic Automover, says he learned “hard lessons” after continuing to use the Magtek Magnet Stripe Card Reader, which is not EMV compliant. “Many companies are yet to realize that if they are not EMV compliant, fraudulent transactions rather than banks will be directly condemned.”
The chargeback ultimately cost the company around $15,000, says Vazquez. “Additionally, processing fees have skyrocketed due to non-compliance,” he adds. But after upgrading to an EMV compliant system, everything improved.
“Our fraud rates have dropped dramatically, and our clients felt safer than doing business with us,” he says. “What’s often overlooked (by companies) is that EMV compliance isn’t just about preventing fraud. It also increases trust, increases reputation and adds true long-term value to your organization.”
Chip Card Protection
EMV protection is provided in the form of a chip on the left side. Tip-enabled credit cards It is also known as an EMV-enabled credit card because it is used to create EMV technology. The chip cards are as follows:
- A chip-and-pin card where the customer must enter a personal identification number (PIN) to complete the transaction.
- Chip-and-Signature card. Use a signature instead of a PIN to verify the identity of the cardholder.
Using both types of chip cards, the embedded chips retain payment data and provide a unique code with each purchase. The generated code is only suitable for that single transaction, and the code is constantly changing. As a result, credit cards with chip technology are much more difficult to hack than their magnetic stripe counterparts. However, that extra protection means that the chip card will take a little longer to process.
Before chip technology, credit cards used magnetic stripes to store cardholder data. However, magnetic stripe credit cards areSkim MedThis type of theft by hackers and thieves is not excluded, although less common with chip credit cards.
Because the thief is adapted to chip cards A technique called “shimming.” They use a reader called a shim that fits in the card reader slot of a retailer or ATM. The shim has microchips and flash storage that stores card information.
Information stolen from the Sim contains the details necessary to authenticate and process future transactions. This allows the burglar to create counterfeit credit cards with magnetic stripes. Chip cards usually contain magnetic stripes as backups, so these fraudulent magazine stripes cards do not arouse doubt.
EMV technology aims to reduce consumer credit card fraud, but it also helps businesses to reduce Chargeback This results in fraudulent purchases.
How do customers use EMV cards to make purchases?
A separate process is required to complete a face-to-face transaction with an EMV-enabled credit card, compared to swiping on a magnetic stripe card.
Specifically, with both chip and pin and chip and signature credit cards, shoppers must either soak their credit cards or tap into the terminal. From there, the cardholder will enter a pin (for chip and pin credit cards) or provide a signature (for chip and signature cards).
What are EMV Compliance Standards?
Before October 1, 2015, either the seller or the card issuer may be liable for losses caused by fraud. However, since this date, liability has shifted even if any party (merchant or card issuer) is least compliant with the EMV requirements.
In theory, this deadline should have been sufficient to motivate businesses to change their payment systems to reduce fraud and avoid financial losses. However, many companies have not yet upgraded their payment systems, but they have momentum in the right direction.
In 2023, nearly 14 billion chip cards were distributed worldwide. According to EMVCO, partnerships specializing in payment specifications and security are up 7% compared to the previous year. Founded in 1999, it is collectively owned by American Express, Discover, JCB, MasterCard, UnionPay and Visa.
EMVCO data also shows that over 70% of cards issued worldwide are EMV-enabled, and almost 95% of Card-Present transactions used EMV chip technology.
EMV transaction times have been reduced from 7 to 10 seconds, almost instantaneously. According to the 2020 report By Thales. Contactless transactions can be about 53% faster than traditional magnetic stripe credit card transactions.
How does EMV compliance have an impact as a business owner?
Currently, businesses are not fined for failing to upgrade their payment systems. If you are a business owner who has not yet upgraded to an EMV-compliant system, you must do so, but if you do not make any changes, you will not impose government penalties.
EMV compliance is an industry standard that acts as a guideline rather than a government mandatory law, but if you fail to follow it you may face liability for fraud or chargeback situations.
There are several measures to minimize the risk of being liable for credit card fraud, including:
- Make sure it complies with the EMV standard.
- If you haven’t done so yet, switch to an EMV-compliant card reader.
- Get an EMV compatible POS system.
- Become a mobile reader that accepts chip cards.
Vendors such as Square offer EMV-compliant readers for small and medium-sized businesses that are easy to use at the time of sale.
When is the responsibility of non-compliant credit card transactions?
If you have not upgraded to an EMV compliant card terminal but are processing EMV credit card transactions, you may be liable for any fraud. That’s not because the card issuer was compliant, but they haven’t upgraded the card reader to be EMV compliant.
Even if you upgrade to an EMV-compliant card terminal, you may be liable for fraudulent transactions if you manually enter your customer’s card information rather than dealing with your device’s cards.
When will you not be held responsible?
If you handle magnetic stripe cards in an EMV compliant card terminal and the transaction is found to be incorrect, you will not be held liable for using an upgraded card reader.
Furthermore, if you process your EMV credit card on an EMV compliant system and the transaction is found to be fraudulent, you should not be held liable as it is compliant with the EMV standard.
To eliminate liability and reduce stress, consider partnering with an EMV-compliant payment processing company. Potential companies include PayPal, Clover and Shopify.
How SMEs should adjust their practices?
“It’s been 10 years since the EMV responsibility shift put a burden on small business merchants when it comes to accepting credit cards,” said Robert Livingstone, CEO of Norate.com and CEO of IdealCost.com.
“There are many POS systems that have not been upgraded and only swipe through credit cards. Small business clients with that setup are addressing a few issues,” Livingstone said. “This includes an additional charge of 1% or more for non-EMV transactions, including losing a cardholder billing dispute for fraud and virtually other reasons.”
This is what SMEs can do to keep them compliant:
- Keep a copy of your credit card receipt and related order documents. You need to create a case for card issuers who dispute customer chargebacks.
- If the customer transaction is not performed with an EMV compliant card reader, do not enter your card information manually.
For example, in the case of a “card-less” scam, you can present the issuer with a shipping information and delivery confirmation, as well as a record of communications with the customer.
Scammers can target businesses that don’t have an upgraded POS system, says Livingstone. “They target those companies and can ring a lot of bills knowing they are likely not going to have to actually pay for their products or services.”
Conclusion
EMV-enabled credit cards can be used where credit cards are accepted, but businesses must know The US is still behind When it comes to EMV technology, other regions around the world. In Europe, for example, most countries moved to EMV technology many years ago, with chips and pincards becoming standard.
you Business Ownerwhile you cannot legally be prosecuted for not upgrading to an EMV-compliant payment system, please note that switching should still be a priority. With the long deadline for EMV implementation, if your business is not in compliance with this industry standard, you risk being liable for a credit card fraud situation.
