What Is EMV, and How Will the Adoption Affect My Business?

What is EMV, and how will it affect how I process credit and debit card transaction?

EMV – The industry-recognized specification that forms the basis of chip deployments around the world. Originally created by Europay, MasterCard and Visa. Europay is the Visa of the rest of the world when it comes to credit and debit card processing. Well what does it mean? EMV is the Global standard for processing credit and debit transactions by using a “chip and pin” or “chip and signature” authorization process instead of the “mag-stripe” authorization process we use now.

OK, so what is “chip and pin?” The “chip” is a microprocessor that would be embedded into the credit or debit card that would store account information, this would take the place of the mag-stripe. Your ‘pin’ or signature would be needed to activate the chip to release the account information to authorize and process the transaction.

So, what is forcing adoption of EMV in the United States? Quite simply, it will reduce the amount of money the United States spends on losses of credit card fraud. The U.S. currently accounts for 47% of global credit and debit card fraud even though it generates only 27% of the total volume of purchases, according to Global Card Fraud. We’re talking about 3.5 billion per year in fraud losses in the United States alone. Counterfeit and lost and stolen card fraud represents significant cost to all participants in the payment process, including retailers, acquiring banks, card issuers and cardholders. By lowering the overall cost of fraud in the U.S., will also lower the costs of credit card processing to merchants, and this savings will hopefully trickle down to the general consumer.

Important Dates

By or about April 15th 2013-Processing companies should be ready for adoption.

About October 2013-Overall merchant adoption will start.

Merchant Responsibilities

At the merchant level, a small number of terminals will become obsolete and will need to be replaced. Most merchant credit card terminals will need to be adapted and reprogrammed to accept the new chip cards, they will need to add a PIN pad that has a chip reader to slide the card into if their current terminal is not already equipped. There will also be a shift in fraudulent liability, the merchant will bear the liability of fraudulent transactions that occur at their point-of-sale to those who do not comply with EMV adoption.