What is EMV?
EMV is a term that is thrown around a lot in modern business talk, but many don’t know what it actually means. EMV stands for “Europay Mastercard Visa,” which are the three companies that came together to develop a more secure way for delivering payments; thus EMV was born. While most references to EMV refer to chip-enabled debit or credit cards, EMV is actually a much wider platform that can be used to send and receive payments in a variety of ways, all designed to be more secure as well as more convenient for the end user. For this topic, however, we will only dive into the EMV payment cards side.
EMV cards are different from traditional cards in one key way: they are embedded with a microprocessor. This processor acts as a tiny computer when the chip is inserted in an EMV enabled card reader. What this actually means in practice is that every time that chip card is used, the computer on it generates a unique transaction seal proving its authenticity and thus preventing criminals from making the fake cards that are so ubiquitous with magnetic strip only cards.
Why this is important to your business:
So what does this mean for businesses? As many already now, October 2015 was an important deadline set by the payment industry when liability costs that had been up to that point on the shoulders of banks would “shift” to merchants. Even if business owners never give a thought to their card payment system, their attention is grabbed when they begin to be charged for fraudulent purchases made in their store. That is the dreaded chargeback.
What is a chargeback? Think of a chargeback like this. Bad Guy Bob in Arizona steals the card information from Jane in Alabama and uses it to purchase $2,000 in merchandise from Joe’s Widget Shop. When Jane receives her statement, she contacts her bank to say that she didn’t make the $2,000 transaction. The bank then initiates a chargeback because of fraud. Once it is determined the transaction was fraud, the cost for that transaction will either fall to Jane’s bank or to Joe’s Widget Shop. Prior to October 2015, the cost would have almost always fallen to the bank, but after the EMV deadline of October 2015, the cost falls to the retailer if they are not EMV-enabled. Generally, the party supporting the most secure technology will “win” in a chargeback dispute, thus pushing the fraud liability back to the less secure party.
If that is not convincing enough that EMV can have an effect on a business’s bottom line, some companies have announced that they will begin charging “EMV non-compliance fees” to businesses that don’t accept EMV cards. One large card processor, NPC (National Processing Company) of the Vantiv company, has already begun charging fees to its customers in noncompliance.
While debit and credit card processing may not be the most exciting thing to consider in a business, the financial incentive and heightened security of EMV cards has made it worth the time and investment to make the switch.
For additional information, the EMV company (EMVCO) website is a great tool. Or, you can simply let one of Bank Independent's Business Banking Specialists evaluate the unique needs of your business on-site at your convenience. Just click the button below!