Why retailers need to start preparing for the EMV transition
April 06, 2015

Retailers that accept credit card payments need to prepare for the EMV liability shift on Oct. 1. If businesses haven't updated their point-of-sale systems to accept EMV-chip-enabled cards by this time, they will be liable for fraudulent activity themselves. Because banks will still have to compensate retailers for the loss if they haven't issued new cards to customers, most are on track to offer EMV cards by the deadline, according to PYMNTS. However, many retailers, especially small businesses, are adopting the new technology relatively slowly. Many small retailers recently switched systems to meet industry compliance standards.

Small companies are delaying adoption of EMV-compliant POS technology because they don't see many losses from counterfeit cards or fraudulent transactions. However, there are clear gaps in credit card processing security. In the last few years, data breaches have sharply increased, and smaller retailers are often a target because they don't have the same security controls as larger companies. The security problem isn't improving. In fact, 150 data breaches have already been documented in the U.S. in the first quarter of 2015, according to the Identity Theft Resource Center.

EMV systems enhance security
EMV cards are already in use in many other parts of the world because they offer an extra layer of security compared to traditional magnetic stripe cards. During an EMV transaction, the chip in the card generates a unique code that can't be used again - unlike traditional cards that store consistent data. Hackers can often steal credit card numbers and make purchases without the physical card for this reason. In addition, EMV cards require a PIN rather than a signature, making it harder for fraudulent transactions to take place.

Although stolen data is more commonly seen in online transactions, brick-and-mortar retailers saw substantial losses in 2014, according to American Banker. Some companies aren't rushing to upgrade because there will still be a risk of fraud for card-not-present transactions. As the technology becomes more available, retailers will need to consider implementing it to protect themselves and their customers from losses. Without EMV systems, small businesses could expose themselves to a higher number of chargebacks after the deadline in October.

Despite the delays, 86 percent of large businesses and 59 percent of all U.S. POS systems are predicted to be able to process EMV transactions by the end of 2015, according to data from the Aite Group.

Nexus: G-WEBCD4