blog EMVcard

By Michael B. Jackson, CPA, Senior Manager and Michael Susman, CPA, Senior Manager, WeiserMazars LLP

Since Oct. 1, 2015, the liability for credit card fraud has shifted to the party who is the least EMV-chip-technology compliant in a fraudulent transaction - generally the merchant.

What is EMV Technology?

Europay, Mastercard and Visa (EMV) is a global, technical standard for smart-payment cards equipped with microchips – including both “chip-pin” and “chip-signature” enabled cards. EMV is more secure than the magnetic-stripe cards currently used in the United States. It is expected that over the next few years, the card industry will move entirely to the more advanced chip-pin technology after the initial phase of chip-signature cards are accepted by the industry and the consumers.

Cost to Upgrade

Merchants and some card issuers have been reluctant to adopt EMV technology because of the expense at both the chip-signature and chip-pin stages. Currently, the vast majority of card issuers are issuing the less costly EMV-enabled “chip-signature” cards. However, the new credit card readers to handle these will still cost businesses $500 to $1,000 each. It is estimated that merchants will spend $8.6 billion to replace their POS technology.

Increased Retailer Liability

To address this situation, the major U.S. card issuers have decided that after Oct. 1, 2015, the liability for credit or debit card fraud will fall on the party who is least compliant with the latest EMV technology – usually the merchant. Previously, the cost of fraudulent card transactions was borne by either the payment processor or the issuing company. EMV-enabled cards will not eliminate data theft, but are expected to significantly reduce card fraud in the United States by making it more difficult for criminals to profit from stolen card information. In recent years, the alarming increase in the rate, cost and consumer discontent associated with card data theft has prompted the industry to address the situation and move as fast as possible to a more secure type of card technology.

Benefits of Adopting EMV

There is some belief that the upgrade to EMV is going to lead to an increase in data breaches. Hackers will be searching for businesses that do not adopt the new technology and are likely to instigate cyberattacks on them. Many customers, previously affected by data breaches, will search for those merchants that can accept the more secure cards, and are likely to frequent retailers who have adopted the new EMV technology over those who didn’t.

Another upside to having to upgrade equipment is not just being ready for the EMV technology now, but also potentially for emerging technologies such as ApplePay and Android Pay.

Upgrading your system isn’t cheap, but one fraudulent transaction will likely cost more than the one-time cost of upgrading. 

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