October 2015 marked the beginning of one of the most significant changes in the acceptance of credit/debit cards for the payment of goods and services. EuroPay, MasterCard and Visa, or more commonly known as EMV, is taking a big step in protecting merchants and their customers from fraud. However, with the implementation of EMV, there has come to be a lot of misunderstanding and, in some cases, misplaced fear. My hope is that the format and content of this article provide the necessary clarity. So, with that said, let’s get started:

Is it true that, as a business owner, if I accept a lost, stolen, or fraudulently duplicated credit card for payment, I could be financially responsible for the losses?

Well, in a word, yes, you could be potentially responsible. To limit and possibly eliminate your risk, you absolutely must use an EMV-equipped terminal. Many merchants still use older, now outdated credit card terminals with magnetic stripe readers, putting them at unnecessary risk.

Where and how can I get one of these new terminals?

Your current merchant service provider should be able to upgrade you with a new terminal, most likely at some cost. Chances are, there are also many sales guys knocking on your door, instilling fear into you regarding this change of risk and trying to sell you a new terminal or worse, set up a long-term gold-plated lease. Unfortunately, there have been many in this industry who have used this massive change in the payments landscape as an opportunity for personal financial gain. Be informed, free terminals are also available for traders.

How are these new EMV terminals different from the terminals we’ve been using for years?

While at first glance these new terminals look very similar to your existing terminal because they still have the magnetic stripe reader (we’ll discuss why in a future question). The difference is that the new terminals have a slot where you insert a smart chip credit card into the machine instead of simply swiping it.

So when I accept the card for payment, how is it actually processed differently?

Your customers insert the “chipped” end of the credit card into the smart chip reader in their EMV-compliant terminal, and the card remains there for the duration of the transaction. This allows the chip to create a unique, one-time digital signature for that specific transaction, which the terminal can read, decrypt, and encrypt. In turn, this direct communication between the card and the terminal greatly minimizes the risk related to fraudulent transactions. In addition, the data transmitted by the EMV chip card is constantly changing, making it nearly impossible to replicate.

It sounds like that process would take a bit longer than swiping a card.

Transaction time may take a few seconds longer simply due to the additional security steps required. However, please remember that this additional time is for your protection and that of your client. EMV contactless transactions can also be made using a terminal equipped with NFC (Near Field Communication). These transactions are slightly faster than those where the card is inserted.

What happens if a card chip is damaged and my machine can’t read it?

It is quite unlikely that a chip will be damaged because they are quite well integrated into the card. However, if you experience this situation, you would simply perform what is called an alternate transaction using the magnetic stripe reader. In this scenario, you would not need to worry about fraudulent transaction liability because you had EMV equipment installed and it did not cause the inability to process the transaction. In fact, the POS terminal will document that the most secure chip-embedded form of transaction was initiated first.

If the chip is damaged, can the card number be entered manually?

If the card or chip is damaged and cannot be read, the machine will prompt the customer to re-insert the card a couple of times. If it still cannot be read, the magnetic stripe reader should be used as mentioned above. While manually entering the transaction is an option, it could have liability-shifting consequences that you want to avoid at all costs.

I’ve heard that some chip cards require a PIN, while others require a signature. What is the difference?

The card issuer determines whether the cards it issues require a pin or signature. This migration to EMV is huge in the payments industry and issuers want to make it as simple as possible for consumers. Since consumers are already charged with providing a signature for credit card transactions, this is what will prevail in the market, at least for now.

Will the EMV liability change that went into effect in October 2015 cause any changes to interchange fees?

While exchange rate changes, either up or down, are always a possibility, as of this writing, there have been none that have been a direct result of EMV implementation.

While this article is not intended to be an exhaustive representation on the subject of EMV, I feel like it covers the most frequently asked questions. We will continue to see this industry evolve and become much more sophisticated in the years to come for the protection of all involved.

I hope this new year presents you with new opportunities and increased profitability in your business, as well as a renewed sense of purpose for your life.