Combatting Credit Card Fraud: The October 1st EMV Deadline

Combatting Credit Card Fraud: The October 1st EMV Deadline

Slowly, the U.S. market has been adopting upgraded credit card technology.  The new technology uses a chip instead of a magnetic stripe to conduct in-person payment transactions via credit or debit card.  The static information on a magnetic stripe can be duplicated and used by criminals fairly easily, while the chip creates a unique identifier for each transaction which if duplicated for a different transaction will not work. Thus, the chip is more fraud resistant.  The deadline for businesses to adopt chip-reading technology came and went on October 1st.  But, not every consumer has an upgraded card and not all businesses have employed the new technology.  So what does the “deadline” mean?

The deadline was set not by government, but by industry.  Europay, Mastercard, Visa (EMV) set the new standard for credit and debit cards, which has been adopted in many countries.  The October 1st deadline in the United States is actually the effective date of a change in liability policy that serves as an incentive for merchants to employ chip-reading technology. Previously, the cost of payment fraud has fallen largely on card issuers, but the new standard will place the liability on the party that is least compliant with the new EMV technology.  So, for companies that do a lot of face-to-face payment transactions that may be attractive targets for criminals, adopting EMV standards is pretty important.

Earlier adoption of EMV chip technology abroad (70% of payment terminals outside the U.S. use the EMV standard, and in 2014, 96% of transactions in the EU were made with chip-enabled cards) has made the U.S. more attractive to criminals.  In 2015, the cost of card fraud in the U.S. may well top $10 billion.  Upgrading seems prudent.

Still, the U.S. transition to chip-enabled credit cards is slow-going.  According to a recent survey by ACI worldwide, an estimated 59% of consumers haven’t even received chip-enabled credit or debit cards yet.  As for businesses, only about 40% of retailers are expected to be EMV-compliant by the end of 2015, and some 7% of small businesses are not aware of the technological shift.  As you might expect, larger retailers (with a lot more transactions and more resources to invest) are earlier adopters.  The cost of a EMV chip reading point-of-sale terminal ranges from around $200 up to $1000.

For more information on deadlines and EMV technology, the Smart Card Alliance has a website that is good resource for businesses and consumers alike.