Small businesses should prepare for EMV credit cards coming in October 2015

Fraudulent transaction liability is shifting to retailers who do not have EMV processing technology.

Most businesses accept credit cards either in person or for online purchases. Starting in October 2015, the liability of credit card purchase fraud goes to the entity who is not using the EMV (Europay, MasterCard and Visa) technology, most likely the business that accepts the card.

Presently, if you accept a fraudlent payment, the bank issuing the card is liable for the amount of the fraud and the bank will absorb the cost. There is a “liability shift” that will be actualized in October 2015. If your business accepts a fraudulent payment, and you do not have an EMV card reader, your business will absorb the cost of that fraud. The banks are no longer going to be liable. In other words, if your business processes a fraudulent sale of $25, you will be out that $25 if you do not have an EMV card reader.

EMV technology has been around since 1992. Europay, MasterCard and Visa (EMV), is a global standard for interoperation of integrated circuit cards. These cards have a built-in micro-processing chip that contains authentication data that validates the card as genuine at the POS (point of sale). The “chip” will communicate with your EMV-enabled POS terminal and authenticate the transaction. These cards are difficult to counterfeit and are in use around the globe. The United States market is one of the last countries to use this technology.

EMV cards work just like your normal credit card. The only difference is that you will not swipe the card; instead you will place the card in the reader where it remains until the transaction is complete. Some EMV cards require a PIN to complete the transaction; however, the United States have not made that a requirement for processing transactions.

What does this mean for businesses? First of all, you will need to obtain a new processing device that is capable of accepting EMV cards. Unfortunately, you will bear the cost of this new device. But it is a worthwhile investment because if you do not have an EMV card reader in October 2015, you could be paying for any fraudulent transaction.

Paul J. Werner is a Michigan State University Extension educator from L’Anse, Michigan. You can obtain free business counseling by registering with the MSU Product CenterWerner has many years of experience in small business ownership and entrepreneurship; he and his wife currently own two small businesses in the Upper Peninsula of Michigan. 

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