Key considerations for the EMV transition
April 17, 2015

EMV chip and pin cards are one of the most important payment trends of 2015. However, many retailers and small businesses may not understand how to approach the transition or the potential costs of not doing so. Card issuers set a mandate for a liability shift in October: Merchants must switch to a point-of-sale system that accepts EMV cards by the deadline or pay the costs of fraudulent transactions themselves. Currently, card issuers and banks repay retailers and consumers for their losses.

Brief history of EMV
The Europay, MasterCard and Visa payment standard started in 1994 and has been widely used around the world since the early 2000s, except for in the U.S., according to ZDNet. Magnetic stripe cards are more prone to fraud than EMV chip cards. Not only can magnetic cards be duplicated, but hackers can acquire card data and use the account without having the card present. The chip generates a code unique to the transaction, and cardholders must enter a PIN as well, which is why the EMV shift is expected to cut down on credit card fraud.

EMV cards became widely implemented in Europe because countries did not have the telecommunications infrastructure needed to process credit card transactions, so they were verified with the PIN. The U.S. had the systems in place, but as cybercriminals have gotten more sophisticated, POS software has become more vulnerable to data breaches. Because customer payment data is stored on these devices, data breaches expose retailers to financial and reputational damages.

There was little reason to switch because magnetic stripe cards are inexpensive to replace, and consumers had no liability for fraudulent transactions. However, this will change in October when retailers will need to accept the costs of fraud.

Merchants and consumers need more education on EMV
Although many card issuers are already sending customers new EMV-enabled credit cards, many retailers are behind on switching to new POS technology. Credit card processing providers already have the systems to start accepting EMV payments, according to Payments Source. Some merchants are delaying the transition because of the costs of implementing new hardware, but paying the expenses for fraud could be far more costly.

Currently, there is a relative lack of awareness about EMV cards. While many card issuers are already releasing them or have plans to do so, some customers aren't sure when they're supposed to stop using their old magnetic cards.

Nexus: G-WEBCD2