Credit Card Industry Switches to EMV

The payment card brands such as Visa and MasterCard are transitioning from traditional magnetic stripe cards to chip enabled EMV cards. As part of this process, banks and other financial institutions have begun to issue chip cards to their customers.

What is EMV?
EMV stands for Europay, MasterCard, Visa. It is a global payment standard that relies on a microprocessor chip embedded in cards. Information (data) about the card and the card holder are stored in the chip embedded in the card(s).

Why the transition to chip cards and EMV technology?
The current magnetic stripe cards store data on a band of magnetic material on the card which is relatively easy to counterfeit and thus less secure. By comparison, if the data on the chip of an EMV card is tampered with it becomes unusable, making the card useless to those trying to counterfeit it. Wherever EMV technology has been implemented around the world it has shown the ability to significantly reduce card fraud.

An Industry in Transition
The payment card brands such as Visa and MasterCard are transitioning from traditional magnetic stripe cards to chip enabled EMV cards. As part of this process, banks and other financial institutions have begun to issue chip cards to their customers.

To encourage merchants to upgrade their terminals to enable the reading of chip cards, the card brands have introduced an “EMV Liability Shift” which took effect in October, 2015 So, what does this mean for businesses?
Previously, the liability of a chargeback from credit card fraud always fell to the card issuer (i.e. bank / financial institution). Today , this liability has shifted to the merchant in certain scenarios. It’s important to note that this liability shift is dependent on two important components - EMV cards and EMV chip-enabled payment terminals. Where the liability falls depends on both what type of card is being used by the customer and the capabilities of the terminal used by the merchant (EMV-enabled or magnetic stripe).

What is my Exposure

Currently, Spectropay terminals (i.e. card readers) can only read magnetic stripe cards. When a chip card is used in the terminal it will be read and processed as magnetic stripe. If the chip card is fraudulent, you the merchant would be responsible for the loss.
However, we believe the risk to Spectropay merchants of incurring any actual losses due to the liability shift is relatively low for three reasons:

  1. Local merchants presently process relatively few chip cards
  2. Chip cards are very difficult to duplicate, greatly reducing the merchant’s chance of processing a
    fraudulent one
  3. There have been no reported cases of card fraud across the Spectropay network since we began operations

What is Spectropay Doing?
During December we anticipate on replacing our current magnetic stripe terminals with EMV compliant ones.

In the meantime please read the attached document, ”Breaking Down the EMV Liability Shift”, to better understand the scenarios where merchants now have exposure (see pages. 8, 10).

http://info.ingenico.us/emv-ebook-registration