Quick Take

  • Beginning in October 2015, without an EMV compliant terminal, Merchants will become financially liable for certain types of fraudulent charges they were previously exempt from
  • There is NO NEED to buy or lease a new terminal:
    Real Merchant Solutions can provide one without charge

Read the full details below

The merchant processing world is all abuzz about EMV, the “chip card” standard coming in October 2015, but many businesses remain skeptical and don’t understand why merchants need EMV terminals. After all, over the years they’ve been told so much that isn’t true, that they can’t be blamed for suspecting that the eager merchant processing salesperson pitching EMV compatibility may be just telling them another story to try and get their business. The fact is that EMV is real, and in many cases, the liability for absorbing the costs of fraudulent transactions is being shifted from the banks to the merchants. Business owners who don’t adapt to this technological change could pay dearly.

An EMV compliant VX520 Terminal

An EMV compliant VX520 Terminal with a slot to accept Chip Card transactions

Currently, if a fraudster purchases goods or services using a counterfeit credit card, the consumer is held harmless and the merchant receives full compensation for the sale, as long as they followed the prescribed procedures. Beginning in the fall of 2015, that all changes. If an EMV card is presented by the customer for a purchase, but the transaction is completed using an out of date terminal without EMV chip technology, the merchant will have to absorb more chargebacks and be liable for the cost of certain fraudulent transactions. Business owners who stay with their old terminals, or who don’t change to equipment capable of processing EMV-secured chip cards, will see an increase in chargebacks for counterfeit or stolen card fraud. Avoiding this increased liability for fraudulent transactions is exactly why merchants need EMV terminals.

The change to EMV chip card technology provides real benefits to both cardholders and merchants, because they ensure that only the rightful card owner can use the chip card, protecting against lost or stolen card fraud. EMV protects data on the chip against unauthorized charges, thus reducing counterfeit fraud.

The Fraud Liability Shift

Here are the facts:

  • Beginning October 1, 2015, all merchants must have EMV-capable terminals to avoid the fraud liability shift. After that date, only merchants who are equipped with EMV-capable terminals that accept chip cards will be protected from financial liability for card-present fraud losses from counterfeit, lost, stolen and non-receipt fraud.
  • If a fraudulent transaction does occur when the customer presents a chip card, but the business does not process the sale using EMV compliant equipment, the merchant takes on the liability of all disputed transactions due to fraudulent activity. However, if the customer has a chip card and the merchant uses EMV compliant equipment to process the transaction, the card issuer assumes the liability and chargeback, and the merchant is off the hook.
  • Retail merchants must ensure that their terminals, POS systems or mobile payment devices are EMV capable, and that chip card transactions can be performed successfully using the device. Although merchants are not required to support EMV at this time, after October 1, 2015, the fraud liability shift will go into effect, making the business owner liable for card-present fraud if they don’t use EMV-capable processing technology for customers who try to pay with chip cards.
  • Some merchants will resist these changes, because they have not had problems with fraud in the past, and don’t want to switch to new equipment. The problem is that it is exactly those businesses that will become prime targets for increased fraud, as scammers will be looking for merchants who stay with the old technology because of the increased difficulty of committing card-present EMV fraud on compliant equipment. Even though your business may not currently have an issue with fraud, this could change with the increased implementation of EMV technology.

How Processing Procedures will Change

Processing sales with chip cards and EMV compliant equipment will work a bit differently than with the traditional magnetic strip cards:

  • When the customer is ready to pay, he inserts the card with the chip facing upwards into the card slot at the end of the terminal.
  • If the customer is using a chip and PIN debit card, they will be prompted to enter their PIN, or sign if they have a chip and signature card.
  • The card stays in the slot until the transaction is finished, and then once the transaction is complete, the customer will be prompted to remove the card.

If a merchant or a customer tries to swipe the card using a magnetic stripe reader, EMV terminals will automatically require the chip card be entered into the terminal’s card slot. Those who are unfamiliar with the process may also try to remove the card before the transaction is complete, and so it will be up to the merchant to understand the process and educate the customer on the proper processing technique. One thing to know is that EMV terminals will still allow merchants to accept the traditional magnetic-stripe credit and debit cards using the stripe reader on the terminal. However, if the terminal is EMV capable, customers with chip cards must pay using the chip-card-processing method.

An example of a outdated and non-compliant terminal and an example of why merchants need EMV terminals

An example of an outdated and non-compliant terminal, and why merchants need EMV terminals: this older machine leaves merchant liable for “fraud shifting. Machines like these are often seen for sale at very low prices on eBay, for good reason.

In some cases, merchants already have EMV compliant equipment, but will find that when they try to process a chip card, nothing happens. Beware! Many processors have put EMV equipment on the street without providing the added software application necessary to accept EMV transactions. In these cases, the processor has essentially abandoned it’s merchants, and a terminal and processor upgrade will be required. Sadly, many terminals do have the card slots, but most do not have the necessary secured software application to accept chip cards.

Restaurants that allow customers to pay at their table face other challenges. If the customer has a chip card, it will not be possible to just have the waitperson walk away with their card as has been done in the past. To be compliant, restaurant owners will need to upgrade to chip card enabled wireless, Bluetooth or mobile/tablet POS applications to provide “pay at the table” processing solutions. Real Merchant Solutions works with processors that have these options available today. Also, because of security issues, “tip adjust” will not be available on EMV-enabled solutions, so customers will have to enter tip amount on the terminal at the time of sale.

Another thing to keep in mind is that although chip-card enabled terminals will work on true analog phone lines, it is highly recommended that an ethernet connection be used. Internet transactions are more secure, and because there is so much more data being transferred, chip card transactions take a little longer, but using an internet connection makes the process quite fast. True dial up using analog phone lines will work, but transactions may be painfully slow. Digital, VoIP and fiber optic lines are not recommended, as there are known issues and are not PCI DSS compliant.

Why Merchants Need EMV Terminals, and How to Get them for Free

Chip Cards, the new standard of securitySmart merchants don’t have to get caught out and tagged with expensive chargebacks for processing fraudulent transactions on old equipment. As Merchant Advocates, Real Merchant Solutions works with only the best processors in the country, and features honest, economical pricing without contracts or early termination fees, and always provides free, EMV compliant equipment.

Contact Real Merchant Solutions today to learn how to protect yourself and save on all your processing requirements!

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Russell Halley

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