What is EMV & Liability Shift?

credit cardWonder what EMV and liability shift everyone in the credit card world is talking about?
Many merchant are now noticing what is commonly referred to EMV (Europe/MasterCard /Visa). EMV is standard for inter-operation of integrated circuit cards (chip cards) for authenticating credit or debit card transactions.It is basically credit cards (currently used in Europe) that have chips in them that make it harder for fraudsters to replicate.
In the same context as EMV, in the United States, the credit card associations (Visa, MasterCard, American Express, etc) also refer to this as the liability-shift. According to the October 1, 2015 timeline:
1. If a consumer uses a magnetic stripe in an EMV-capable credit card point of sale (POS) terminal and the transaction turns out to be fraudulent, liability will rest with the issuer (bank) of the original magnetic stripe card.
2. If a user uses a magnetic stripe card for a fraudulent transaction on a POS terminal which cannot process EMV, the liability for the fraud will rest with the merchant. So the impact is only on transactions that turn out to be fraudulent. Naturally, the relevance of this increases as the average transaction amount increases. So, retail merchant selling high ticket items are much more likely to be effected than a fast-food restaurant or frozen yogurt shop.
For the majority of merchants no real change will occur on October 1, 2015.
At this point the following must be noted:
1. The major banks (Global Payments & First Data) that ultimately process the transactions and provide the direction and software coding have not yet (as of April 2014) offered the necessary coding to credit card processors, terminal providers and POS companies. This is the issue between the major players that is being “worked out.”
2. There continues a battle between the credit card associations (Visa, MasterCard, American Express, etc), acquirers (banks), processors, and major retailers as to the implementation of this. POS companies continue to look to work with these entities on the implementation of this.
3. Less than 10% of all cards are equipped with chip technology available and it is estimated that it will take at least three years to convert all the cards.
4. All credit card terminals regardless of technology will continue to work past October 1, 2015.
5. Most consumer will be using magnetic strip cards on October 1, 2015 until all cards are converted or replace putting the cost of this on the banks
6. Any new hardware requirements will be made available by the deadline by most POS or merchant account companies.
7. Realistically, the most impact of this is for large retailers (not small ticket) given the rate of fraud and chargeback is insignificant in small ticket merchant such as the frozen yogurt industry or bakeries. HOWEVER, since the only requirement for a charge-back is that the merchant does not have an EMV-ready compliant system and the customer presented an EMV card, chargebacks can increase across the board as merchants are victimized by this.
8. Clients who have had POS systems approaching 36 months by October 1, 2015 should actually consider replacing the systems as it nears the end of its life cycle based on warranty. In 48 months, most POS systems have seen over 17,000 hours of usage and about 35,000 hours of on time. Another important consideration is other components of the POS system which may also require updating which may include operating systems. So, each merchant’s unique situation must be considered before deciding on the best course of action.
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Sintel Systems is the only full-service provider of tailored Point of Sale systems across retail, restaurant and service industries, including frozen yogurt shops, pizzerias, sushi restaurants, caf├ęs and retail stores.
* There is naturally a possibility that the deadline will be moved given the variables involved. This is one reason few POS companies are actually offering the hardware at this point. The hardware with no software coding is essentially a useless slot.
Sintel Systems is here to help your business grow. As a single source for business solutions, our experienced, knowledgeable team negotiates the complex POS landscape for you to enable you to find the right POS system for your business and budget. HardwareSoftwareSupport