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Demystifying the EMV Liability Shift

Demystifying the EMV Liability Shift

As a member of the Board Retailers Association, you receive exclusive access to services and information provided by our Associate Members. Today, Heartland Payment Systems, an independent payment processor, offering credit and debit card processing, payroll processing via offices located throughout USA, shares the inside scoop on the EMV Liability Shift. If you’re already lost, don’t worry, our friends at Heartland will guide you through it.

The acronym EMV stands for the European MasterCard Visa consortium that developed payment card technology utilizing embedded chips. EMV is a set of standards designed to protect debit and credit cards that are accepted at the point of sale, as well as ATM transactions. The EMV standards were formed by Europay, MasterCard and Visa in 1993.

Today, there are more than 1.5 billion EMV cards deployed in more than 120 countries on four continents. “By the end of 2015, 70% of U.S. credit cards and 41% of U.S. debt cards will be EMV enabled”, says Aite Group. The United States will be the last developed country to migrate to EMV.

Businesses that implement an EMV solution may benefit from a reduction in card present fraud, decreased requests for copies, and fewer disputes, as well as the unrelated but valuable opportunity to update terminals for other capabilities like Near Field Communication (NFC) contactless acceptance.

As part of the US migration to EMV, Visa, MasterCard, Discover and American Express have mandated liability shifts for fraudulent transactions effective October 1, 2015. Generally, liability will shift to the party using the least secure technology.

Let’s look at counterfeit card fraud liability first.  When a Visa branded card is in question, liability for fraud shifts to the business when a counterfeit mag stripe from a chip card is used at a mag stripe terminal after October 1, 2015.  When either a MasterCard or American Express branded card is in question, liability for fraud shifts to the business when a counterfeit mag stripe from a chip card is used at a mag stripe terminal after October 1, 2015.  Businesses accepting Discover branded cards that have deployed EMV technology will not be liable for counterfeit card transactions.

We also need to consider lost and stolen card fraud liability.  A business is never liable for lost and stolen card fraud with a Visa branded card.  Liability shifts to the a business when a lost or stolen chip & PIN card is used at a less secure terminal after October 1, 2015 or to the party using the least secure customer verification method if both the issuer and merchant are EMV when a MasterCard or American branded card is in question.  Merchants accepting Discover with Chip and PIN terminal capability will not be liable for lost and stolen transactions.

Businesses that accept credit and debit should evaluate their current and anticipated chargeback ratios.  They should also think about their customers’ sensitivity to card security as well as how their competitors are going to respond to the EMV migration.  Consumers are looking to do business with merchants that they perceive to be secure.  Also to be noted is the business’ location and demographics.  Is the business located in areas that caters to customers carrying international cards?  If so, it would be wise for the business to consider upgrading to accept EMV cards.

If you have questions about EMV, how to be sure your business is in compliance, lowering your cost of payments, how to better manage your store network, improving transaction security, or anything related to payment processing, please reach out to Drew Gonzalez, Relationship Manager at drew.gonzalez@e-hps.com or 910-409-0892.