10 Things Small Business Owners Need to Know About the 2015 Credit Card Rules
By: Kevin T. Mullins
Senior Vice President, Electronic Services, IBC Bank
- Q: What is an EMV chip card?
A: A Europay, MasterCard, Visa (EMV) chip card contains a small computer chip embedded in the card which generates a unique one-time code for each transaction, making them much more fraud resistant than traditional magnetic-stripe cards. EMV chip cards have been in use in Western Europe, Canada and Mexico for several years but are just starting to catch on in the U.S.
- Q: Why is the industry changing from magnetic-stripe to EMV technology?
A: By transmitting unique authentication codes for each transaction, EMV technology provides a higher level of security for both cardholders and merchants. Card-present transactions in countries using EMV technology have a significantly lower occurrence of card fraud than other regions.
- Q: How does using an EMVcard differ from using a magnetic-stripe card?
A: Instead of “swiping” your card, you will either “dip” the card into a slot on the terminalfor contact-based transactions or “tap” the card on the terminal in contactless transactions. In either case you will then either sign your name or enter your PIN.
- Q: How does this change impact merchants who accept debit/credit cards?
A: Merchants are urged to replace their current Point of Sale (POS) terminals with EMV-enabled equipment by Oct. 1, 2015. That’s the date liability for fraudulent transactions conducted with a counterfeit debit card shifts from the card issuing institutionto the merchant.
- Q: Isn’t fraud the bank’s problem?
A: As of October 1, 2015, if an EMV debit card is used at a POS terminal that does not support EMV and a fraudulent transaction occurs due to a counterfeit card being used the liability shifts to the merchant. If the fraud occurs after the merchant upgrades to EMV-compliant equipment the issuer (bank) takes liability.
- Q: Is there any penalty for not upgrading POS equipment?
A: Merchants are not required to replace their current equipment. Most new EMV-enabled cards will also have a magnetic stripe enabling merchants to continue processing transactions as they do today. It is a business decision whether to take the risk of continuing to process magnetic-stripe transactions.
- Q: Will merchants be charged any differently for EMV-enabled transactions?
A: Merchants should contact their transaction processing companies to determine if there are pricing differences.
- Q: What kind of training will my staff require?
A:Handling an EMV card transaction can differ greatly from a swiped magnetic-stripe transaction. For example, an EMV card transaction must stay dipped in the terminal for the entire transaction. Early removal will terminate the transaction. Restaurants, for instance, typically take the card away for processing. Those businesses operating with “back-of-store” terminals will experience changes when terminals are brought to the cardholders to either sign or input a PIN.
- Q: Where can retailers learn more about their options and the risks associated with accepting debit/credit cards after the Oct. 1, 2015 liability shift?
A: Visit http://usa.visa.com/download/merchants/visa-merchant-chip-acceptance-readiness-guide.pdf, emvco.com, or smartcardalliance.org for more information.
10. Q: How much will it cost merchants to upgrade their POS equipment?
A: Merchants should contact their transaction processing companies to determine equipment pricing.
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Kevin Mullins is senior vice president of electronic services for IBC Bank where he directs the operational oversight of products and services including: online banking, mobile banking, card services, ACH and corporate treasury management and merchant services.
