New Credit Cards with Embedded Chip Offer Increased Fraud Protection

Retailers Face Additional Liability if They Don’t Adopt the New Standard

Have you heard about the new credit or debit cards with an electronic chip? Do you have one? If not, it’s likely you will receive one sometime soon.  These new cards offer better security along with some new card processing technology for retailers.

EMV is the new global standard for card payments.  EMV is named for the developers:  Europay, Mastercard, and Visa.  CreditCards.com estimates that 70% of credit cards and 40% of debit cards in the U.S. will employ the new chip technology by the end of 2015.

What’s so great about the new EMV cards?  The biggest change is the added security offered by the electronic chip.  Old cards use a magnetic strip that hackers are able to copy.  The chip in the new cards creates a unique transaction code that can’t be used again, and if someone does copy the card information and try to make another purchase, the card will be denied.  Experts caution that no system is completely secure, but the new EMV cards are expected to significantly reduce fraud.  The U.S. is the last major market to implement the new EMV standard.  In other parts of the world, the EMV standard has been around for many years.

Recently issued cards with the EMV chip also include the magnetic strip, meaning they can still be used in older card machines that are not updated to EMV standard yet, leaving the transition smooth for consumers.  If a new EMV card is being used  in one of the new EMV machines, you will no longer swipe the card to make a purchase.  Instead you will “dip” your card by inserting it into a card reader and leaving it there until the transaction has completed.

Beginning October 1, 2015, most retailers will have an incentive to use the new EMV card processing equipment.  At the present time, if a fraudulent card transaction takes place, it is usually the card-issuing bank that is responsible for the loss.  However, for certain transactions after October 1, this liability will shift to the retailer if the retailer does not use the EMV system.  The matter of liability for detecting fraud is complicated, and there are exceptions that may apply, but it is definitely true that many retailers will have additional risk if they don’t employ the new EMV card processing equipment.

There are a few challenges for retailers.  The technology to accept the new cards will have a cost.  Depending upon the point of sale equipment used by a retailer, the new equipment may cost several hundred dollars per cash register.  Small retailers who have less sophisticated point of sale systems may have less expensive options.  QuickBooks, for example, promises to soon offer an EMV card reader that is expected to cost $30.  In addition to the computer equipment, there is also expected to be some cost to train cashiers to use the new system.

In a world with increasing fraud, utilizing technology, like EMV is an important step to protect your hard earned money. The technology in the EMV cards better protects consumers and reduces fraud costs for the credit card companies. If retailers make an investment in the new technology, it protects them as well.  Reducing credit card fraud is good for all of us, and hopefully the new EMV cards help us all achieve that goal.

Melissa Schwartz

About the Author

Melissa Schwartz
Staff Accountant Fox Cities

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