EMV/Chip Cards: What SMBs Need to Know

As a business owner or manager you may or may not have heard of EMV® or chip cards. Already the global standard, EMV cards are finally making their way to the U.S., replacing antiquated magnetic stripe technology beginning this October.

What is EMV?

EMV is an acronym for Europay, MasterCard and Visa, the originators of the technology. EMV technology features an embedded ‘chip’ in each plastic card, which is actually a small yet powerful microprocessor. Unlike existing magnetic stripe technology, the ‘chip’ creates a unique code sequence for each payment transaction, adding additional security against fraud for both the customer and the business owner.

The major difference between EMV/chip cards and magnetic stripe cards is how they are ‘read’ at the payment terminal. Traditional magnetic stripe cards are quickly swiped through a reader while EMV/chip cards are inserted, or ‘dipped’, by the customer and left in place for the duration of the transaction as the embedded chip communicates back and forth with the EMV compliant terminal.

Another difference is that EMV cards are always in the customer’s possession. EMV readers or terminals are customer facing, providing additional security by eliminating handling by the cashier.

Why does EMV matter to me?

If you own or manage a brick and mortar store or take in-person payments, then you absolutely should be paying attention to EMV. One of the key elements around EMV migration in the U.S. is a new liability shift for fraudulent transactions that shifts responsibility to the business owner from the credit card company. Effective October 1st 2015, if a customer uses an EMV chip card and the business does not have a payment terminal that accepts EMV transactions, and the transaction is fraudulent, the business will be liable for any charges.

EMV’s impact against fraud is proven. According to the UK Cards Association, as a result of EMV implementation in the U.K., fraud on lost and stolen cards is now at its lowest level in 20 years and losses at U.K. retailers have fallen by 67% since 2004.

And, card issuers in the U.S. continue to aggressively migrate consumers to EMV cards. At the end of 2014, there were an estimated 101 million EMV cards deployed and it’s estimated that there will be over 500 million deployed by the end of 2015.

What do you need to do?

The first thing you need to do is to make sure you have a terminal/point-of-sale system that is ready to accept EMV payments before October 1st. If you currently have a traditional stand-alone terminal, you should contact your credit card processor. If you have a POS system, you should first contact your POS developer or VAR and then reach out to your merchant services provider. 

EMV is real and it’s not hard for small and mid-sized businesses to be prepared. Upgrade today. It’s not worth the financial or business risk to wait.