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What Merchants Need to Know About EMV Compliance

PAI – Dec 9th, 2013

EMV Chip on a Credit CardSince the EMV standard was created in the 1990's, it has been adopted around the world as a universal and more secure way to handle credit and debit card transactions. Canada, Europe, Asia and Latin America have all had success implementing and using the standard as a better way to handle card transactions.

Noticeably absent from the list of users is the United States, whose financial institutions, processors and hardware vendors are just recently working to adopt the standard. As a merchant in the United States, you will undoubtedly hear a lot of talk about EMV in the coming months and years. Here is what you need to know so you can stay ahead of the game and understand how the EMV compliance standards will affect your business.

Six frequently asked EMV compliance questions

1. What is the EMV standard?

EMV stands for Europay, MasterCard and Visa. It is a global standard for smart card payments and acceptance devices. It was created in the 1990's as a standard set of requirements to ensure interoperability between chip-based payment cards and terminals.

2. What are chip-based payment cards?

A chip-based transaction card contains an embedded microprocessor that offers enhanced security features not possible with traditional magnetic stripe cards. In addition to enhanced security, chip cards offer contact, contactless and mobile payment operations.

3. How is EMV more secure?

On EMV payment cards, all of the payment information needed to complete a transaction is contained in a secure microprocessor chip rather than a magnetic strip. In addition, counterfeiting is prevented by a required card authentication that can be completed on or offline, and cardholder authorization can be completed using online PIN, offline PIN or a signature for both credit and debit transactions.

4. How will fraud liability change with EMV?

In today's financial market, the institutions that issue credit and debit cards carry the weight of the liability for fraud. This will change once the EMV standard is fully implemented. Rather than financial institutions covering fraud, some liability will move to processors and individual merchants. Because of this, merchants need to pay close attention and get a full understanding from their processor as these changes are made in the coming years. Accepting EMV-enabled cards may help protect merchants from liability for fraud.

5. Do merchants need new equipment?

MasterCard, Visa, American Express and Discover have all announced plans to implement EMV in the United States. Each processor has a roadmap that contains deadlines of when merchants must have terminal equipment that supports EMV transactions, usually starting in 2015. Because EMV uses chip-based cards instead of magnetic strip cards, merchants will need new equipment to take full advantage of EMV. Check with your processor to see if your current terminals support EMV transactions, or if you will have to upgrade/replace your equipment to stay compliant.

6. Do merchants have a choice?

The EMV standard is coming to the United States, and will eventually replace the existing standard of magnetic strips. Though there is currently no government mandate, the large processors are taking it upon themselves to get things moving. Merchants will have a choice in adopting the new standards but they at the risk of greater fraud liability when EMV cards are accepted but the merchant doesn't comply with the EMV standard. Merchants will also have a choice in the terminal equipment and customer authorization method. Like current terminals, EMV equipment comes with different standards and features. Whether you want to accept contactless payments, for example, is a feature you need to think about before purchasing new EMV compliant terminals. Choosing not to upgrade equipment can have a major impact of fraud liability for merchants.

Many merchants are choosing to purchase more advanced equipment now in hopes of future-proofing their card processing equipment. In addition, merchants need to decide whether they want to require customers to sign the transaction, enter a PIN or not require authorization in any form.

If you're a merchant looking for more information on how EMV will affect your business, get in touch with a PAI representative. We can offer more information specific to your industry, offer advice on how to capitalize on EMV's unique features, or set you up with one of our EMV ready credit and debit card terminals.

Tags: [Merchant Solutions]