It was like the Y2K of 2015 – EMV compliance was coming in October, 2015. Required for credit card acquirers and processors, these new regulations were a huge step forward in protecting consumers against fraud.
As a consumer, we heard about the changes coming, and went through the inconvenience of activating new cards and cutting up old ones. But beyond that, how much has really changed? More often than not, I come across this sign on most EMV-enabled machines:
Look familiar? The hype of the EMV deadline came and went after October 2015, but it feels like not much has changed since then. That’s because the ability to accept EMV or “chip-enabled cards” was not mandated for merchants like you—so why is it important to your business? Because going forward, if your restaurant runs a fraudulent credit card, you will assume liability for those purchases.
What is EMV?
If you don’t know what EMV is by now, it’s probably time to read up. EMV is also known as “chip card technology,” which has long been used in business overseas. These cards include embedded microprocessor chips that store and protect cardholder data. Chip-enabled cards create a unique code valid for only that specific transaction. That encrypted message is sent from the merchant to the bank with specific information, including: the account number, expiration date, terminal or merchant ID, dollar value of the transaction, and other important information. Once the processor approves the encoded message, it sends a secure message back to the merchant signaling the transaction is approved. Unlike magnetic strip cards, which houses static data that can be easily copied with a simple (and inexpensive) card reading device, chip technology helps combat fraud with its dynamic authentication capabilities. Because a new code is created each time you use your card, it makes it more difficult for thieves to steal your personal information and make fraudulent orders.
Which is why chip-enabled cards eat up an additional 30 seconds of your time during checkout.
But if EMV is so great, why has it taken the United States longer to adopt it this technology? MasterCard product expert Carolyn Balfany tells Business Insider that it’s due to our robust security system. Unlike other parts of the world, the US always had “real time transactions,” which meant merchants immediately sent off credit card information to the issuer for verification; merchants in other countries may swipe your card and store that information for an indefinite amount of time, sending it to your bank for approval later that day.
Another reason for the delay? The geographic distance.
Am I required to support EMV or chip card technology at my restaurant?
Technically no, there is no legal or regulatory requirement to install EMV readers at your business. However, leading card brands like American Express and VISA are penalizing merchants who process a fraudulent order due to a lack of EMV technology. That means that your business would assume full responsibility for fraud through the use of counterfeit or stolen cards. To see if your business is at risk for these types of purchases, review your charge-backs to determine if they’re due to counterfeit or stolen cards. If the numbers are low, you may way your risk assessment of fronting the cost of installing new EMV readers.
But consider this, waiting too long to upgrade to EMV readers could hurt your business as well. As more chip cards enter your customers’ hands, you may have to explain to your customers why you continue to swipe their card instead of processing it in a safer way. Not only that, while most cards continue to carry the magnetic stripe (so consumers can still pay via chip or traditional swipe), eventually cards will be chip-enabled only, which could leave you in a lurch with your customers.
EMV technology will need to integrate with your POS system, so if you’re shopping for a new system then review those that incorporate this technology in addition to encryption and tokenization technologies. Learn more about how to protect yourself from huge fines from card companies, customer lawsuits and damage to your brand by checking out this webinar from the National Restaurant Association.