With EMV® Readiness the Weakest Link Pays for Fraud


EMV® chip technology is an evolution in payments that will help increase security, reduce card-present fraud and enable the use of future value-added applications. Merchants who accept credit cards have an important deadline associated with EMV approaching. If after the deadline you fail to migrate to EMV payment processing, your business may be responsible for fraud-related costs that could have been prevented with the use of a chip-enabled point-of-sale (POS) system.

The liability shift refers to the change in who bears the chargeback related cost of fraudulent transactions. Presently, issuing banks assume any liability if fraud originates from a counterfeit, lost or stolen credit card. This industry-mandated EMV liability shift impacts all in the payment processing chain — the issuing bank, the acquiring bank, the payment processor and the merchant. If as a merchant, you are the only entity in the payment processing chain (of the issuing bank, the acquiring bank, the payment processor and the merchant), who is not EMV compliant and a fraudulent purchase is made using a counterfeit card in your business, you will assume responsibility for the fraudulent cost if you have not upgraded to a compatible terminal. Currently, most card-present counterfeit card losses are the responsibility of the bank that issued the card. However, on October 1, 2015 the card companies are changing the rules. As of that date, the entity responsible for the EMV information will be held financially responsible for certain card-present counterfeit losses. That means that if the bank issued a card without the microchip, it may be responsible for any card-present fraudulent card losses. However, if the card had the microchip and the provider did not process the information, then the provider may be responsible for any losses. What merchants need to understand is that the provider will pass any such loss onto the merchant if the merchant did not have equipment capable of processing the EMV information.

With the exception of Visa® which does not enforce a liability shift for lost or stolen cards, following the October deadline, liability shifts to the merchant when a lost or stolen chip card (also known as “smart card”) is used at a less secure terminal. The timeframes for compliance are:

  • Most merchants (petroleum pay–at-pump transactions are excluded at this time) need to support EMV by October 2015
  • Petroleum pay-at-pump merchants need to support EMV by October 2017

The purpose of the liability shift is to encourage a more rapid adoption in the U.S. Most other payment infrastructures around the globe already have or are in the process of implementing chip-based technology as the processing standard.

One of the biggest selling points of EMV chip technology is its superior security features. The key factor is that the microchip generates dynamic data that is unique to each individual transaction, virtually eliminating the possibility that a fraudster or identity thief can obtain and reuse the information illegally.

Smart cards are a newer generation of card that contains an integrated circuit. With a chip in the card, it is very difficult for a fraudster to produce a copy of that card. Smart cards with chip technology have a small computer embedded in the chip that has information about the transaction. It can make decisions about what happens during that transaction. The chip itself can also verify a PIN that is entered at POS – so-called Chip and PIN cards, as used in Europe. This is the basis of EMV.

To learn more about transitioning to EMV, read our whitepaper on What Merchants Need to Know to help prepare you to embrace EMV technology in your business. Contact a knowledgeable TransFirst representative to help find the right EMV-capable credit card machine for your business.

EMV is a registered trademark or trademark of EMVCO LLC in the United States and other countries. TransFirst, LLC is a registered ISO/MSP of: Wells Fargo Bank, N.A., Walnut Creek, CA, and Synovus Bank, Columbus, GA, for Visa® and MasterCard® only.

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©2017 Total System Services, Inc. TSYS® is a federally registered service mark of Total System Services, Inc. All rights reserved. TSYS Merchant Solutions is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA; Synovus Bank, Columbus, GA, and First National Bank of Omaha, Omaha, NE. TSYS Business Solutions is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA; Synovus Bank, Columbus, GA; and Deutsche Bank, New York, NY for Visa and Mastercard transactions only.

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