Beginning Oct. 1, your business rather than the banks will be liable for certain types of credit card fraud unless you change your systems from accepting only traditional magnetic-stripe credit/debit cards to those that also accept EMV cards.
An EMV card--also known as a chip card--is a global standard for credit and debit card payments named after its original developers (Europay, MasterCard, and Visa). It contains a computer chip that protects the buyer's data and is very hard to counterfeit. The cards have been used in most major countries for years, and the United States is one of the last places to make the transition to EMV cards.
One of the most important reasons for this change is to curb credit card fraud, for which the United States has the dubious distinction of being a major global contributor, officials from the Small Business Administration (SBA) explained during an Aug. 26 webinar on the issue. They said that in 2013 alone, the United States lost $5.3 billion in credit card fraud.
At this webinar, the SBA detailed what made the EMV cards so safe in comparison to the standard magnetic stripe card. First, the cards are encrypted, which means that they are much harder to counterfeit than the magnetic cards. Next, the data on the chip is constantly changing, while by comparison the magnetic strip does not change. Finally, there is a secret language spoken between the card and the reader every time a payment is made to ensure authenticity.
To use the EMV card, you dip it into the terminal where it remains for the duration of the sale. Due to the extra security measures, the transaction takes longer to process than with typical magnetic stripe cards.
If there are so many benefits to using the EMV cards, then why is the United States waiting until now to make the change? The answer to that is simple: The cost of replacing the cards as well as the terminals. But with more companies issuing cards containing the chips, credit companies decided to expedite the process of making the switch.
Companies that choose not to make the switch and continue to only use magnetic stripe terminals will be fully liable for any fraud that occurs when EMV cards are used on the magnetic stripe terminal, the SBA said. Fraud liability remains with the bank when it occurs during an EMV transaction on an EMV terminal or a magnetic stripe card transaction on a magnetic stripe terminal.
With that being said, all your company has to do to get ready for the change in liability is buy a new reader that is EMV compatible, the SBA officials said.
When looking for a terminal for your company, go to Google to find the perfect unit for your store, SBA officials said during the webinar. The costs of the machines vary, with some costing under $100 and others over $1,000. You want a unit that is simple enough for you, cost effective, and can handle multiple forms of payment, including not just magnetic-stripe and EMV cards but also non-contact payment methods in which you hover a device like a smart phone or smart watch over a terminal.