EMV Credit Cards: What Merchants & Consumers Need to Know
By Gary Cardone, eConsumerServices
In October, the U.S. is expected to make its first big leap toward transitioning to EMV (or “smart”) credit cards – some 41 percent of U.S. terminals are expected to be EMV-capable by Oct. 2015 - a move that will decrease fraud and increase consumer protection, but there are some things consumers need to be aware of when making the switch.
Payment processing in the U.S. has been lagging behind the rest of the globe in one major way; EMV. Introduced in Europe less than a decade ago, the United States is finally integrating the chip-and-PIN technology come this October.
Europay MasterCard Visa, commonly known as EMV, is a global technical standard or set of requirements for smart payment devices and cards. Named after the technology’s originators, EMV cards contain a microchip, within which the cardholder’s data is stored. These chips, or integrated circuits, have been designed to protect consumers from fraud at the card present point of sale.
EMV cards are only accepted at specific EMV capable point of sale terminals—some of which require the card to be inserted into the reader, while others are virtually contactless. For the consumer, however, all that is required is the retrieval of a new card obtained through the issuing bank. The use of a chip is the crucial difference from typical magnetic stripe debit and credit cards, which are swiped and signed for when used for purchases. The EMV cards have imbedded intelligence that requires the consumer to remember a four-digit pin code, not unlike common debit card use at ATMs and key pad terminals. This authentication check thru EMV technology provides the consumer and the merchant greater assurance that their transaction is safe and secure, and their credit card will not be attacked, hacked, or used by fraudsters. The North American adoption of EMV has been plagued with delays and implementation uptake as no one player seems to want to go first, not to mention the expense related to such a wholesale change.
As time ges on and more and more businesses migrate from POS to e-commerce via PC and mobile devices, EMV shall encourage fraudsters to shift their attention to softer targets. Although EMV des not address e-commerce transactions the same way, the technology is remarkably effective on POS transactions. As connectivity across the globe becomes more significant, and shoppers convert from in-store purchases to online purchases, it will become clearer that the tools to protect against e-commerce centric cyber crimes are not as pervasive or effective in protecting against questionable consumer behaviors, much less outright fraud attempts.
As far as merchants are concerned, they should be aware that many banks across the country are already in the process of reissuing credit and debit cards to all customers. However, merchants are the party most greatly affected by the need to replace all point of sale terminals in order to accept payment. Customers, in fact, will experience very little change in their daily habits and although some unknowingly, are being further protected from fraud.
It is thought that EMV when introduced and implemented across the North American landscape shall further isolate criminal attempts from Point of Sale and redirect criminals to focus on soft targets such as e-commerce, (Card Absent or Card Not Present transactions) where there are less effective tools to fight fraudsters, criminals and unscrupulous consumers.
Several experts postulate that chargeback fraud shall see a steep rise upon EMV launch in the USA, as criminals shift their tactics and strategies to low hanging fruit targets, thought to be the e-commerce market place where such tools as EMV are non-existent. Further, the systems and processes by which the industry regulates e-commerce transactions allow for gaping holes in the system through which consumers and those with fraudulent intent to arbitrage the system, resulting in waste and leakage to the merchant community greatly exceeding 12 billion dollars per year. It is imperative that the industry deploy rules, processes and tools to ensure a fair, equitable and balanced e-commerce market place for the entire value chain between consumer and merchant.
Gary Cardone is the CEO of Global Risk Technologies and eConsumerServices.
Global Risk Technologies is most known for their role in payment processing solutions that cater to each side of the value chain: Chargebacks911.com and eConsumerServices.com. The firm is headquartered in Tampa Bay, Florida with offices in Ireland and Atlanta. They have approximately 350 employees worldwide and currently manage over 150MM in transactions each month, with clients located in the U.S. and Europe.