You may have heard the acronym EMV thrown around in the credit card industry or merchant services industry, and still be unsure of what it means to your business as a merchant. Well, Century Business Solutions is here to clarify what it is, where it is going, and what it means to you.
For starters, EMV stands for Europay, MasterCard, and Visa. EMV is now a global standard for inter-operation of integrated circuit cards (IC cards also referred to as “chip cards”), IC card capable point of sale terminals and automated teller machines, for authenticating credit and debit card transactions. So why make things more complicated and change the system now? Well there are two main reasons why creditors are making an EMV push: improved security (fraud reduction) and the possibility of finer control of “offline” credit card transaction approvals. EMV chip card transactions improve security against fraud compared to cards with magnetic strips because cards with magnetic strips can be replicated easily. In addition, with credit cards today, merchants have to rely on the holder’s signature as well as a visual inspection of the card’s hologram. EMV cards carry security and other validating data on computer chips embedded within the cards – making replication extremely difficult and nearly impossible.
EMV technologies are already fully implemented and utilized in the EU region and Canada, but is slowly making its way into the United States. Matter of fact, EMV is getting quite a bit of traction in the United States with dates of 2015 and 2017 set to shift liability to merchants that have not invested in the EMV technology. Postma an EMV expert at TMG stated, “Ultimately, long term, EMV will help mitigate the fraud landscape. However, the migration to EMV is going to take several years and according to statistics I’ve seen, only about 40% to 45% of merchants and issuers by the 2015 date will be EMV-enabled. So once that liability shifts, there won’t be an automatic reduction in fraud. It will take several years.”
In order to enhance security measures for EMV before it arrives in the United States, credit card companies are exploring the possibility of linking credit cards with mobile phones. For example, some have suggested that credit card companies require a card user to text a unique password every time a transaction is initiated by the user. They are also looking into using mobile location technology to compare and confirm with a transaction’s IP address to see if there is a geographical match between where the user is and where the transaction is trying to be approved. The EMV Migration Forum, and independent cross-industry organization, was created to address issues that require cooperation and coordination across the payment space in order to successfully introduce secure EMV contact and contactless technologies in the United States. The organization says that its membership has grown to 133 member organizations from throughout the entire payment industry, including global payment brands, financial institutions, merchants, processors, acquirers, regional debit networks, industry suppliers, and industry associations.
So with all that said…what does this mean for merchants? With talks of an EMV switch, merchants have come together to show resistance to the changes due to the extra incurred costs of making the switch to accept EMV credit cards. Although the switch would reduce fraud, it also allows credit card companies to shift all liability to merchants and the consumer. To add insult to injury, merchants would also be forced to buy new point of sale terminals to accept these new type of secure credit cards. For this reason, many large nationwide fast food chains and retailers such as Wendys, Costco, and Sinclair Oil Corp have argued the benefits of moving to EMV cards.