In the past few months we have had an increased number of our merchants asking questions about EMV, “Chip + Pin” or “Chip + Signature” credit and debit card acceptance for their businesses. What is it? Do I need a new terminal? When do I have to be ready?
We had a merchant tell us another processor had called him; and in a ploy to get him to switch to their company, told the merchant EMV was here in the US and he had to upgrade his terminal and sign with them so he wouldn’t be charged any fees and would still be able to take payments.
Truth? In a word, NO. EMV has not yet hit the US in full swing. Most payment processors are not ready to support the EMV transactions at this time. There are terminals that are EMV ready, but without the software in the machine, you cannot accept the EMV transactions anyway.
So what is all the fuss about? We have done our best to break out what is going on with EMV in the USA and what it means to you as a merchant.
What is EMV?
EMV stands for Europay, MasterCard and Visa. It is a joint effort between these three entities to create a global standard for credit card acceptance. As a term, EMV refers to the standard technical requirements of chip-enabled payment devices.
EMV credit cards are commonly referred to as “Smart Cards”, “Chip + Pin” or “Chip + Signature” Cards. The Chip refers to a microchip which is embedded in each credit card. The chip is what will transmit the card data to the terminal or POS system, and is essentially replacing the magnetic stripe on the back of our current credit cards.
There are two types of Chip cards, “Chip + Pin” and “Chip + Signature.” Chip + Signature cards work exactly like our current magnetic stripe cards, using a signature to validate the card holder identity. Chip + Pin cards will require the user to enter a 4 digit PIN number to validate card holder identity.
Chip + Pin cards are, by nature, more secure than Chip + Signature cards. To use Chip + Pin cards, the PIN number needs to be entered exactly right for the transaction to go through. Signatures can be forged, therefore are less secure. Please see The Chip Debate section below for more on Pin vs Signature cards.
Visa’s EVM Roadmap
On August 9th, 2011, Visa announced its “roadmap” for EMV adoption in the US. See Visa’s press release for full article. It is important to note, Visa’s “roadmap” is a call-to-action for the credit card processing industry. At this time there is no government enforced mandate that says merchants must be able to accept EMV transactions.
The following is the time table Visa intends to implement regarding EMV adoption in the US.
October 1st, 2012
Visa will expand TIP (Technology Innovation Program) to the US. This allows merchants, who have a terminal which is enabled to support both contact and contactless chip acceptance, to eliminate their PCI validation requirement.
The important word in this sentence is BOTH. In order to eliminate the PCI validation requirement, your terminal must support BOTH contact and contactless chip acceptance. If you do get a terminal that is EMV ready, ensure it accepts both types of chip cards to avoid the PCI requirement.
April 1st, 2013
Visa will require US acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions.
This means the acquiring banks that move the funds need to have the software ready for you, the merchant, to have the capability to run EMV/Chip cards. It does not mean you have to start accepting EMV/Chip cards by 04/01/2013; but that you will have the option to by that point in time.
April 19th, 2013
MasterCard will be shifting liability for ATM transactions to the ATM Host Owner for any fraud losses. MasterCard clarified the liability shift with the following, “To be clear, we are not mandating the U.S. ATMs must accept EMV cards. Rather, we are saying that if a chip card is presented at an ATM that does not accept a cross-border transaction, then the liability shift occurs.”
Unless you own an ATM, this really does not apply to you as a merchant.
October 1st, 2015
Visa INTENDS to shift liability for card present (POS) transactions from the card issuers to the merchant’s acquirer. Meaning, if the merchant does not switch to EMV/Chip enabled terminal/POS and had a fraudulent transaction/chargeback; the merchant’s acquirer is financially liable for the transaction and must refund the card holder.
Again, the important word to keep in mind here is INTENDS. Visa has not set this date in stone.
It is important to note as well, when this liability shift occurs in October of 2015, the acquirers will most likely pass this liability onto you, the merchants. This is the date by which you will want to be EMV ready in order to protect yourself against fraudulent card present transactions.
October 1st, 2017
Visa INTENDS to shift the liability for fuel dispensers (i.e. pay-at-the-pump gas stations) from the card issuers to the merchant’s acquirer. As with the October 2015 liability shift, the merchant’s acquirer will be financially liable for fraudulent transactions run on non-EMV/chip enabled equipment.
The EMV Chip Debate: Chip + Pin vs. Chip + Signature
There is still industry debate going on whether to make Chip + Pin or Chip + Signature the standard in the US. Chip + Pin is going to be more secure, and therefore better for the merchants. Some issuing banks are favoring the Chip + Signature cards, claiming US consumers are not going to take well to using a PIN number with their credit cards.
At this time there is no clear winner in the debate. The card issuers have not started to issue EMV/Chip cards in mass. Most of what has been issued in the US is cards for overseas travelers that want to use credit cards abroad in Europe.
BNG’s EMV Action Summary
In summary, do you need to get a new credit card terminal/POS system to accept EMV/Chip cards?
Yes, at the earliest, you will need to upgrade this equipment within the next 3 years, by October 1st, 2015. This is an early estimate. Remember, these EMV cards have not started to be issued in high quantities in the US.
We do recommend if you are in an area on the boarder (Canada or Mexico) you look at upgrading your equipment sooner. EMV has already hit Canada and Mexico, if you get a lot of foreign customers coming through your establishment you will want to be able to accept payments from customers using EMV/Chip cards.
What it all boils down to is that EMV is a coming trend in the states and although it’s a few years off before it’s going to be a mandatory thing , it doesn’t hurt to be prepared. BNG has spent the last 4 years developing a technology company so that we could always be on top of the coming trends in the industry. If you have any other questions on the topic or you’re just wondering what your business needs to do to be ready, contact our office and we can help you plan your future course of action.Contact BNG For More Info
Written By: Ryan Theis & Katie Gjerde