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Understanding the EMV Liability Shift; Tips from a Kansas City Merchant Processing Company

EMV cards, also called chip cards or smart cards, are designed to provide a more secure environment to better protect against card fraud and, after much anticipation, are now being issued in the U.S. In order to promote the EMV technology to retailers, card issuers have set an October 1, 2015 deadline, in which all systems must comply with new technology or risk being held liable for fraudulent transactions. Now that the long awaited “EMV Liability Shift” has finally arrived, what does this mean for your business?

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EMV technology has previously been adopted in Europe, Asia and Canada, but past attempts to roll out the more secure chip cards in the U.S. have floundered. The “Liability Shift Program” is intended to encourage banks to issue EMV chip based cards and to incentivize businesses for adopting EMV equipment. Simply stated, the liability shift program sets a rule that whichever entity (either the issuer of the card or the business accepting the card) has the lesser capability to utilize EMV cards will accept the liability for counterfeit fraud transactions. For example, if a card-present business, such as retail, are not set-up with EMV equipment when an EMV chip card is presented for a sale, the business accepting the card is assuming the risk if the transaction turns out to be counterfeit.       

The Liability Shift affects transactions made after October 1, 2015, however, bank ATMs have until October 2016 to be compliant and gas station Automated Fuel Dispensers (AFD) have a compliance deadline of October 2017.

Going forward, card-present businesses will need to weigh the benefits and risks of adopting EMV capability. Many card-present businesses are finding that the benefits of fraud avoidance – reducing liability of counterfeit transactions and presenting a secure environment for the customer – justify the move to EMV.

As a point of reference, businesses can expect to pay about $300 for a new EMV terminal. New terminals being issued should also support Near Field Communications (NFC) and solutions such as Apple Pay, Android Pay and Google Wallet.

Each business can decide if adopting EMV technology is right for them, but should be aware of the risks associated with accepting counterfeit cards after October 1, 2015. To learn more about fraud protection, click here or call MSP Consulting at (855) 890-4900.

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