Process EMV (chip cards) or Be Responsible for Fraudulent Transactions – Part 2
This is part two of a two part series (read part 1) on EMV chip cards. This article is written mainly for brick & mortar retailers as the October 2015 rule changes discussed in this series are specific to card-present merchants. However, ecommerce merchants also need to understand the potential impact as some entities predict that EMV’s added security at the card-present level will result in more fraudulent transactions at the card-not-present level.
Currently, card-present counterfeit card losses are generally the responsibility of the bank that issued the card. However, on October 1, 2015 the card companies are changing the rules for that responsibility and the lowest form of security will be responsible for these chargeback losses.
What that basically means to a card-present merchant is the merchant will more than likely be responsible for the chargeback loss if a transaction involved counterfeit card information from a card issued by the bank with a chip but the merchant did not have a POS (Point of Sale) device that could properly read/transmit EMV chip card information.
Therefore, the first decision merchants need to make is whether they want the financial responsibility for these chargebacks or if they want to make sure they have the proper POS device to read/transmit EMV chip card information.
I suspect the card companies are hoping that the liability shift will be enough to convince most merchants to obtain EMV POS devices. However, merchants also need to consider their clientele. Cardholders are concerned about identify and card theft. Personally, I’m already irritated by major retailers that cannot process my chip cards especially when they have already been breached. Cardholders will probably learn to appreciate the added security of EMV. If so, how will your customers view your business if you are the only one on the block that can’t process the chip card information?
Also, bad guys tend to go to the point of least resistance. If you are the only merchant on the block that cannot process the EMV chip card data, then you may be the point of least resistance. This is also the reason why some entities believe ecommerce merchants will see more fraudulent transactions. Therefore, ecommerce merchants should have a discussion with their provider as to what they can expect specific to any potential increase in fraudulent activity with your account plus any information/tools the provider has to prevent it.
Other factors card-present merchants need to understand
- It appears that most chip cards will be “Chip & Signature” versus “Chip & PIN.” In other words, the cardholder’s signature will be required instead of a PIN number. However, some issuers may require their cardholders to use a PIN number. PIN entry accessibility may cause issues and added cost for certain merchants. For example, restaurants generally have their POS device away from the cardholder. Therefore, some restaurants may have to invest in wireless EMV PinPads or other solutions to enable Chip & PIN at the table. Also, businesses like doctor offices often have their POS device behind the front desk window. Therefore, they may need to buy an EMV PinPad that connects to their POS device so patients have privacy while entering their PIN number
- Chip cards can be processed as contact or contactless. An EMV POS device should recognize a chip card if it is swiped and prompt the merchant to insert the card in the EMV slot so the chip data can be read. In this case, the card is left in the slot during the entire transaction process. Some POS Devices and PidPads have NFC (Near Field Communication) capability to enable a contactless transaction. NFC capable devices can read the chip information if the chip or other NFC enabled devices, such as a cellphone, are placed within a couple inches of the NFC receiver.
- Apple Pay requires NFC capability. However, not all providers can currently process Apple Pay, even if you have a NFC receiver, because Apple Pay uses a format called tokenization so customers don’t have to enter their card information at the POS device.
- Merchants who have software based POS systems will need to discuss their EMV needs with their POS distributor. Also, not all POS systems currently have an EMV solution. Therefore, merchants need to make EMV part of their discussions when reviewing different POS System solutions.
- Merchants also need to train their staff on EMV acceptance. Click on the links below for a Visa brochure on EMV and a video produced by VeriFone, a terminal manufacturer, to help in that effort.
http://usa.visa.com/download/merchants/visa-merchant-chip-acceptance-readiness-guide.pdf
https://www.youtube.com/watch?v=fy94lrK2zw4
What should EMV POS Devices cost?
The good news is if you have obtained a new terminal in the last 2 or 3 years it is probably EMV capable. It may require an upgrade and your provider may have a swap-out program at a reduced cost or no cost to enable chip card processing.
If a new EMV terminal or EMV PinPad is required, just realize that it generally costs the provider around $200 to $300 for a new EMV terminal and around $100 to $125 for a new EMV PinPad. Wireless devices are more.
What you will pay is up to your provider’s business plan and your negotiation skills. I’ve found most reputable providers are not charging over $350 for an EMV terminal and $150 for an EMV PinPad when purchased through Customer Service. If you are fortunate enough to have a good servicing salesperson that is willing to review your needs, than also understand that value as well as the salesperson’s travel and time when determining a reasonable cost. Lastly, anyone who has read my articles knows that I detest lease programs and I have heard of EMV terminals being leased for up to $99 per month for 48 months. If your provider or salesperson tries to lease the equipment to you, than I suggest you find a new one for more reasons than just the equipment lease.
Summary
The purpose of this series was to give a general overview of EMV chip cards, the liability changes taking place on October 1, 2015, and the type of decisions merchants will have to make specific to EMV acceptance.
Merchants must discuss their specific needs with their provider, salesperson, and/or POS system distributor to ensure they meet the October 1, 2015 liability requirements and their own needs.
