EMV Technology What Small Merchants Need to Know

EMV Technology What Small Merchants Need to Know Credit Hamik/Shutterstock Overthe last few years,credit card databreachesat chain storeshave exposedthousands of customersto hackers looking tomake a quick profit off their victimsinformation.In an effort topreventsuchsecurityviolations,merchants have beenurgedto accept EMV chip cardssince the fall of 2015orelsebearthecostof any ensuing fraudulentactivity.CreditCards.comreports thatthis initiative has resulted in855millionchip cards issued to American consumers, representing 85 percent of credit cards and 60 percent of debit cards issued by the end of July 2017.Thoughthenumber of geschftslebenes accepting chip-based credit and debit cardscontinuesto grow,somegeschftliczu sich umganges,including manysmall merchants,are totentotenleise hesitantabout adopting thistechnology.To help you better understandthe current state ofEMVand what it means for your businessmoving forwardheresan overview ofitsstandards and e xpert advice for small business owners.What is EMV?EMV, whichis named after its original developers (Europay, MasterCard and Visa), is a global credit card standard that enhances the security of in-person card transactions.EMV technology allows sensitive cardholder data to be stored in a chip, rather than in the magnetic stripe found ontraditionalpayment cards.Since individual organizations can only do so much tostopcybercriminals, the credit card payments industry instituted EMV policies to fight credit card fraud. The governmentalso stepped in to lead a nationwide effort to better protect consumers. In October 2014, President Obama issued an executive order to implement enhanced security measures for consumer finances. Part of this order, which is detailed in a?White House fact sheet, requiredpayment card issuers to embed cards with secure EMV microchip technology by October 2015.The technology has been around for about two decades and is used in much of the world, but the chip-en abled cards have only really caught on in the U.S. over the past few years,saidMikeBlang, senior vice president of sales and absatzwirtschaft atWind River Financial, a merchant account provider.How EMV worksEMV technology is very simple on the customers end. Instead of swiping the magnetic strip of a credit card,you dipone end of the cardinto the EMV reader so it can scan the chip.For EMV technology to work, the point-of-sale (POS) system where the card is used must be equipped to read and communicate withthe microchip.At each transaction,themicrochip creates a unique code that cant be used again.This is very different for the traditionalmagnetic stripe card,whose datacan be easily copied by an inexpensive card-reading device and reproduced in counterfeit cards.EMV cards provide an additional layer of security by requiring a PIN input instead of a signature when authenticating purchases, said Dax Dasilva, founder and CEO ofPOSsystem provider?Lightspeed.Understanding theliability shi ftThe largest card issuers, including MasterCard, Visa, American Express and Discover,announced that merchants and issuers who did not untersttzung chip technology by October 2015 would be held liable for anycounterfeitfraud.However, the migration to EMV chip technology welches not a mandate,saidBlang.As a result, many small businessesavoidedmaking the transition. In fact, accordingto a?recentManta surveyof more than 2,000 small business owners,56percent of therespondents said they did not accept EMV chip cards.Many of the business owners we work with are unaware of this risk of not accepting EMV,said Mark Guagenti,website technology coordinator and marketing assistant forTidal Commerce, a payment processing company. Guagentis experience is not unique,asdemonstrated by the65 percent ofMantarespondentswhoexpressed being unfamiliar with the fraud liability shift for EMVcredit cardsand the34 percentwhodidnt know what EMV technologyisor how it may impact their business.There are nuances ,but the general idea is that in the past,the card issuer held counterfeit fraud liability,explainedBlang.After Oct. 1, 2015, the entity that had invested least in chip technology,whether itsthe merchant or the card issuer, holds the fraud liability going forward.For example,if a customer has a chip cardbut the merchant does not have a terminalthat is certified for chip card acceptance, then the cost of anyfraudulent transactionwillbe that merchantsresponsibility.Some merchants didnt know their level of counterfeit fraud liability since, in the past, issuers simply absorbed the loss,saidBlang.Challenges of switching to EMVA lack of understanding of the liability shift isonly one of the reasonssomemerchants have delayed implementation of EMV technology. Some businessesare reluctant to take ontheupfront investmentfornew hardware and software upgrades.Many business owners fear that the cost to upgrade to an EMV terminal is steep,said Guagenti. This can be the case especially forrestaur antsorbusinesseswith multiple locations,he added.Getting the appropriate certificationsin a timely fashion has been anotherchallengeforbusiness owners, even thosecommitted to the conversion process. In addition to adopting new software so they can accept EMV, merchantsand their newly EMV-compliant terminals must undergo a certification process.Many software providers underestimated the complexity and time of getting certifications completed,saidBlang.In some environments using integrated point-of-salesystems, the software needed to process chip transactions was not certified bythe date of the liability shift.Thisputs merchants in the precarious position ofhaving their new terminalsset up and ready to gobut still waiting to be certified, even though they are already being held accountable for any fraud that occurs with customerswhohave EMV chip cards.Thoughitsa frustratingsituation,Blangremainsoptimisticabout the overall impact EMV will have on the marketplaceandreminds merchants tha tevery day,more and more providers are being certified and rolling out EMV to thosewhowant it.In fact,the Manta survey reportsthat77 percentof small business owners who havemovedto EMV technology saidthe transitionwent smoothly.According toBlang, the U.S. is largerand morecomplexthan any otherpayment card marketin the world.This, combined with what was arguably a shorter migration timeframe, may lead one to believe that what was achieved was actually nothing short of moving mountains,he said.Perks ofEMVThe benefits of EMV technologyhave not goneunnoticed.Fraud reduction is the biggest payoff.The level of success is subjective, but some industry statistics indicate that counterfeit payment card fraud is already down byup to 40 percent,saidBlang.MasterCardreportedthat fraud decreased by 60 percent in terms of dollars among its top five EMV-compliant merchants,according toPYMNTS.There are many otherbenefits business owners?shouldconsider when upgrading to EMV.According to Guagenti, the newEMV-compliantterminals provide endless add-ons and support mobile purchases with Apple Pay and Android Pay. Guagentialso pointedout thatEMV technology provides pay-at-table and pay-in-aisle options,which allow customers to pay where they are, without their credit card everleaving their hand.Todays technology is?making it even easier to integrate systems into legacy POS,and stand-alone?systems are comparable to older machines,said Guagenti.Your new machines will provide?you with a better customer experience and increased protections.Customers arealso beginning toappreciateEMV.According to a surveyof 2,000 U.S. adults bypersonal finance websiteNerdWallet,78percentof respondentssaid they like EMV cards,with 47 percent believingthe cards make transactions more secure, and 48 percent concludingits their preferred way to pay at the store.AccommodatingcustomerswithoutEMV cardsNot allcardholders have receivedupdated, EMV-enabled versions of their credit cards. This isnt something merchan ts have to worry about, as long as they have already made the switchto EMV technology.EMV-compatible terminals and machines are also set up so they can swipe traditional magnet stripe cards,saidSuneeraMadhani,founder andCEO of?Fattmerchant, a credit card processing solutions provider.So,if a consumer walks into the business without an EMV card,they will still be able to process the transaction.However, the business will not be responsible for fraud-related losses from those swiped transactions.If a business has implemented the technologybut customers dont have a chip card, the liability burden remains with the banks,said Matt Schulz, senior industry analyst at?CreditCards.com.Generally speaking, the only case in which the liability burden shifts is when a credit card holder has a chip card but the merchant doesnt have the technology to accept the chip card.MovingforwardIf a business hasnt upgraded to EMV technologythey should make plans to do so as soon as possible,Schulz advised.Wh ile it is definitely expensive to make these upgrades, the reality is that the merchantrisks facing far greater costs if they end up getting stuck with the bill for future credit card losses.Switching to EMV will mean adding new in-store payment technology and internal payment-processing systems all while complying with new liability rules, but its a crucial investment,addedDasilva.Although EMV technology is a strongdeterrentto fraudulent activity, itcannotprotect consumers from all data breaches. Card-not-present fraud, which involves purchasesmade online, by phone or via mail order, is on the rise and will remaina problem for years to come.But regardless of what new challengesmay be on the horizon,EMV technology is already the standard around the world andshapingthe future of payment processing.EMV is not a technology trend that will fall by the wayside,Madhanisaid.We are the last country to adopt this technology, and we will only continue to landsee the development of EMV and con tactless technologies.Additional reporting by Nicole Fallonand Sara Angeles.Some source interviews were conducted for a previous version of this article.Editors Note Looking for a credit card processor for your business? If youre looking for information to help you choose the one thats right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free Paula Fernandes Paula is a New Jersey-based writer with a bachelors degree in English and a masters degree in education. She spent nearly a decade working in education, primarily as the director of a colleges service-learning and community outreach center. Her prior experience includes stints in corporate communications, publishing, and public relations for nonprofits. Reach her at fernandes.writegmail.com. 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