What Retailers Need to Know About EMV Cards

By Mike English

What Retailers Need to Know About EMV CardsIf you’re not totally clear on EMV, you’re not alone. Developed over twenty years ago, EMV is the standard overseas.  However, many U.S. small business owners aren’t familiar with the technology, and even fewer know that a deadline is set for migrating to an EMV based system. 

EMV stands for Europay, MasterCard, and Visa, and is a technical standard initiated by major credit card brands to ensure that chip-based “smart cards” and terminals are compatible worldwide.  “EMV” is commonly used to refer to a “smart card.” Simply put, it’s a standard credit or debit card that is embedded with a microchip programmed with unique digital information.  In order for a transaction to be completed, the chip must be activated and verified.  The EMV system chip-based cards, which are much less susceptible to fraud, require insertion of the card into a terminal throughout the entire transaction, or tapped in the case of a contactless transaction.

Smart cards are considered to be much safer than the credit or debit cards featuring a magnetic strip that most of us are currently using.  By October 2015, most U.S. merchants will be subjected to new EMV standards, when any merchant not EMV compliant will be held financially liable if a smart card is used for a fraudulent transaction at a standard terminal that only accepts magnetic stripe. 

Here are a few things you should know about EMV:

It works, and works well

The microprocessor embedded in the smart card helps to authenticate the cardholder and issuer, validate that the card was used at the point of sale, and validate the cardholder through unique PIN entry. When the card is inserted into the smart card reader, the embedded chip is activated, allowing it to transmit encrypted information for user, card, issuer, and usage verification.  The host processor decodes the encryption sent from the cardholder’s smart card, verifies authenticity, and returns an authorization code allowing the transaction to be completed.  After that, everything is pretty much the same.  It’s up to the merchant if a PIN is entered, a signature supplied, or if no customer verification method is needed. Credit card fraud is a growing problem, and cyber criminals are only becoming more sophisticated in their methods of attack.  The EMV process is much more secure, adding an extra layer of protection to the cardholder’s credit data.  

Clock is ticking to make the switch

EMV compliance is not mandated for merchants and processors.  You don’t have to make the switch, but brick-and-mortar merchants who do not upgrade to EMV-compliant terminals by October 2015 face a potential liability shift for counterfeit, lost, and stolen card fraud. A switch to EMV will improve the security of your system, and in light of recent data breaches, customers are looking for merchants they can trust with their credit information.