EMV stands for EuroPay, Mastercard and Visa and starting next week, it will be important for business owners to consider how they employ this payment method. On October 1, 2015 the liability for credit card fraud will shift to the business entity that employs the least effective security technology. In other words, in disputes between the merchant (store front owner) and the credit card issuer (for example a Citizens Bank Visa), the party that uses non-compliant EMV technology will assume the liability for credit card fraud if the other party uses EMV technology. If both parties do not use EMV technology then the liability issues remains unchanged.
So what is EMV technology and how does it work? Have you ever noticed on your new credit card that there is shiny silver square? This is a computer chip and it produces a code that EMV compliant credit card terminals must receive in order to authorize the trasaction. You will no longer “swipe” your card but rather insert it into the terminal. The code will be constantly changing making fraud much harder to occur. In addition, some issuers will also require a PIN to confirm the transaction as well. If either your credit card or the merchant’s terminal is not EMV compliant, the card, for now, will work as before by the swipe method. The only thing that has changed is the potential shift of liability. This is not new technology. Europe has been using this technology for years. For more information on EMV technology, click here.
While it makes sense for brick and mortar stores to switch to EMV compliant terminals it is less clear for on-line retailers. Right now major credit card companies are using two different systems for EMV online technology. MasterCard uses its “Chip Authentication Program” or CAP and Visa offers its “Dynamic Passcode Authentication” or DPA. It is very similar to the choice between VHS and Betamax all over again. Which technology will prevail is anyone’s guess at this point. In the meantime, it’s best to understand what’s out there and make an informed decision for your business’ individual needs.