Why Will My Business Need to Accept EMV Cards?

Eric Bank • January 11, 2018

Business owners take note: on Oct. 1, 2015, banks across the country are switching things up with your customer’s credit cards.

In case you haven’t noticed, banks are adding EMV (Europay, MasterCard and Visa) chips to credit cards, adding a new security measure to complement the relatively easy-to-fraud magnetic stripes.

Banks are pushing this nationwide transition in the hopes it will cut down on the high rates of credit card fraud in the United States. About half of all credit card fraud occurs in the U.S., although we only make about a quarter of the worlds credit transactions.

What’s different about EMV cards?

For customers, switching to EMV technology means far better security than in the past. A card with a magnetic-stripe is relatively easy to replicate because the data it contains never changes.

The chip that new EMV cards contain is essentially a computer chip that creates a unique transaction code every time it’s used, making it much harder to explot. Experts say this will reduce credit card fraud and reduce the chances of mass breaches like Target’s in late 2014.

Will consumers notice a change?

Although the new technology doesn’t drastically change the consumer experiences, businesses will have to make upgrades to the points-of-sale to avoid new liability rules.

A typical EMV-enabled card reader.

Just like the magnetic-stripe cards most of us currently use, EMV cards process payment in two steps: reading and verification.

But instead of swiping your card, like you do with a magnetic-stripe, you insert your EMV card into a terminal slot to initiate the process.

Dubbed ‘card dipping’, the card exchanges information with your bank when inserted into the slot. The transaction “will take a tiny bit longer” than it would with a magnetic stripe, according to Aite Group Research Director Julie Conroy, but the data will be much safer in the process.

While it might seem innovative to most Americans, the EMV technology is nothing new. In fact, most of Europe has been using it for years. The U.S. is the last major market in the world still using the older, magnetic-stripe method.

How will fraud liability work after Oct. 1?

As far as liability goes, the switch to EMV makes business owners more responsible for the credit transactions made in their stores. Right now, if a purchase is made with a counterfeit or stolen credit card, consumer losses typically fall back on the issuing bank.

After Oct. 1, the liability on fraudulent transactions will fall onto whoever is the least compliant with EMV. In most cases, this will be the business.

For example, a customer buys a $50 pair of shoes at your store with a counterfeit card. If your store doesn’t have the proper EMV chip card reader to process the transaction, you could be out that $50.

Because banks and consumers are worried about the safety of magnetic-stripe cards, there’s a lot of pressure for businesses to convert. If you haven’t already, take time to research new card-readers for your business, lest you become a victim of fraud yourself.

Photo credits: shoreline-solutions.com

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

About the Author

Eric Bank

Based in Chicago, Eric Bank has been writing business-related articles since 1985, and science articles since 2010. His articles have appeared in "PC Magazine" and on numerous websites. He holds a B.S. in biology and an M.B.A. from New York University. He also holds an M.S. in finance from DePaul University.