In October 2015, the introduction of EMV in the US reached a major milestone. This is when liability for fraudulent payments shifted to non-EMV merchants who are unable to process transactions when a chip card is presented for payment. This liability shift could have a major impact on businesses (both large and small) that are unprepared.

EMV is one of the biggest changes to happen in the payments world in a long time. EMV, also known as chip cards, is a series of specifications that define a more secure method of payment. It was developed jointly by Europay, MasterCard, and Visa in the mid-1990s.

How does It work?

EMV introduces a small computer or “chip” to every payments device. This chip stores information, performs processing, and contains secure keys that generate cryptographic data. Dynamic data is generated with each transaction, making it nearly impossible to create counterfeit cards or replay intercepted transactions.

What are the benefits of chip cards?

Chip cards are designed to protect against counterfeit fraud through authentication of dynamic data generated by chip cards, smart phones, and other EMV-compliant devices. They also provide risk management parameters at the card level and when used with PIN, can offer protection against lost and stolen card fraud.

How does this affect my business?

As of October 1, 2015, if a customer presents a chip card for payment to a non-EMV merchant and is unable to process that transaction using EMV, that merchant may be liable for any fraud that occurs. Because chip cards require dynamic authentication, an EMV capable terminal is required with a special reader designed for chip cards.