Merchant Services: Chip and Dip Payment Acceptance Is Coming¹

Merchant Services: Chip and Dip Payment Acceptance Is Coming

On October 1, 2015, things are going to change in the world of payment acceptance. That is when the payment liability shift will go into effect and the U.S. will truly begin moving away from traditional magnetic stripe cards to new Smart/Chip cards and EMV (Europay, MasterCard®, and Visa®) technology.

To provide enhanced payment card data security against counterfeit cards, the major card brands have been pushing for widespread EMV adoption in this country for years. Shifting the liability for acceptance of counterfeit card transactions is one of the big milestones on the path to EMV adoption.

Starting soon, if not already, many cardholders will be receiving Smart/Chip cards from their payment card issuers. You will also begin seeing them presented for payment in your businesses. So what do you need to know about EMV technology and the Smart/Chip Cards?

Let’s start with how they work.

Smart/chip cards work by using microchip technology. A chip card stores the payment card’s data in a tiny computer chip embedded within the card. The authorization data is dynamically encrypted and unique for each purchase. Customers will dip (insert) the card into an EMV card enabled terminal. The payment terminals read the chip to ensure that the card is valid.

During an EMV transaction the card never leaves the card-holder’s hand, not even in a restaurant environment. The card stays in the terminal until the transaction is completed by the customer either by entering a four digit pin, signing a transaction screen, or receipt, and in some cases the card issuer may verify by the card’s chip response alone.

EMV is nothing new.

Smart/Chip cards have been used in Europe and other parts of the world for a number of years and they are working to reduce incidents of fraudulent activity. According to an article from Forbes2 lost and stolen card fraud fell by 58% during the five years after UK retailers adopted the technology.

Why the change in the U.S.? Let’s look at a few statistics from Business Insider3.

  • $7 BILLION: The cost of Credit and Debit card fraud related losses in the United States in 2013
  • 51%: The amount of global credit card fraud attributed to the United States in 2013.

What do you need to know?

The liability shift will be effective for fraudulent card present losses which could have been detected through the use of EMV cards and terminals. This means after October 1, 2015, if your business accepts and processes a counterfeit card transaction on a non-EMV terminal, which would have been detected with an EMV terminal, the liability for that transaction is yours, not the card issuers.

In order to protect your business from potential card fraud liability, you will need an upgraded EMV enabled terminal solution.

While card issuers across the U.S. continue to replace the traditional magnetic stripe cards with Smart/Chip cards, the newer EMV terminals will still support the magnetic stripe cards through the transition.

More ways to pay.

Did you know? Many newer EMV terminals are also NFC (Near Field Communication) enabled which means you can accept mobile wallet payments such as Apple Pay™ and Google Wallet.

This means there is a new, more confident way for your customers to pay for their purchases and another way for you to validate and authenticate your customers’ card payments.

If you are ready to upgrade please contact Union Bank. We have a wide range of EMV–enabled terminals available well in advance of the scheduled liability shift. Please call 866-240-1965 for terminals and pricing.