Many cards in America today have magnetic strips at the back. When a customer makes a payment, the processing terminal reads the magnetic strip, using this information to charge the customer’s account. A new, more secure card, the EMV (Europay, Mastercard, Visa) card, has been introduced across the globe, with America a late player to make the shift. The technology has been around since the 90s, and has shown favorable results when it comes to card security.
EMV cards store their information on smart chips instead of a magnetic strip. Whereas magnetic strips contain static information, smart chips encrypt information dynamically. Each time an EMV card is used, different data is transmitted across the server. Hackers can easily copy data off a magnetic strip, but the process if much more complex if attempting to copy off a smart chip. Increased security puts consumers at ease when paying, businesses at ease when processing transactions and will save billions per year.
Europay, Mastercard and Visa teamed up to create this new card standard to reduce credit and debit card fraud. Fraud costs debit and credit card processing companies over $8 billion per year, meaning there is large incentive to create a more secure card.
Liability Shift
Business owners should ensure their credit card terminals are up to date with the latest technology, or they will pay the price. In the past, any financial fraud was placed on the shoulders of debit and credit card processing companies. Effective October 1st 2015, VISA, MasterCard, Discover and American Express, will change their policies. If a consumer makes a purchase with an EMV card, but the POS machine or terminal is not EMV compliant, the business might bear the fraud liability.
The rate of EMV-issued cards is increasing in America, meaning more consumers will be paying with EMV cards. As this technology becomes widespread, thieves will target the easier-to-breach magnetic strip cards at an alarming rate, increasing consumer demand for EMV cards. Consumers will in turn feel more secure paying at POS that are EMV compliant and business owners can rest easy knowing they will not bear fraud liability.
Update by October 1st
Consider setting up a merchant account with a large reputable company who already processes EMV card transactions. Once October 1st 2015 passes, those businesses who failed to implement this new technology will suffer. Laws change constantly, meaning the future may even require EMV-capable terminals for payments to be accepted.