With the fraud liability shift approaching in October 2015 in the U.S., and credit and debit cards evolving to include chip technology, merchants should start preparing now to ensure greater security at the point-of-sale for themselves and their customers.
The lag in EMV adoption in the U.S. has led to a situation in which nearly half of the world’s credit card fraud takes place in the U.S. According to Nilson Report, credit and debit card fraud resulted in $11.27 billion in financial losses during 2012 for financial institutions and merchants . Chip-enabled cards provide multiple advantages – one of the major advantages being reduction in the cost of card-present fraud.
“We have witnessed in other markets that EMV is a tried and true solution for increasing security at the point-of-sale, and is certainly top-of-mind for U.S. stakeholders,” said Ellie Smith, Head of the Discover Chip Center of Excellence. “As EMV is a global standard, supporting chip in the U.S. is a necessity. Using this technology will help to ensure interoperability of payment cards worldwide, and without it, the U.S. is likely to become even more of a focus for fraudsters than it is today.”
To jumpstart the transition for merchants and banks to invest in chip card technology, Discover, American Express, Visa, and MasterCard introduced a fraud liability shift, which states that merchants who have not adopted chip card technology may be held liable for card fraud that could have been prevented with the use of a chip-enabled point-of-sale system.
As of October, if there is an occurrence of card fraud, whichever party has the lesser technology —the bank or the merchant— could be subject to EMV Fraud Liability Shift policy.
With the fraud liability shift nearing, merchants, acquirers, and issuers need to know how chip technology will affect their business. Discover is an active member in various cross-functional industry groups, including EMV Migration Forum (EMF) and Payment Security Task force (PST). These groups focus on driving industry collaboration, working on technical payments challenges in the U.S., and providing industry education and resources in order to drive a successful introduction of chip cards to the U.S.
“We’re committed to security and reliability, and are working to provide innovative solutions for fraud prevention,” added Smith. “As all industry players work to increase security, we must also ensure we don’t disrupt the payments experience for consumers and create unnecessary barriers or pain points. Payments must remain frictionless, simple, and, most of all, secure for consumers.”
Working together, EMF and PST have launched a new brand-agnostic educational website, Gochipcard.com, with dedicated consumer, merchant, and issuer pages These pages are customized to educate these parties on aspects of chip technology specific to their business. Additionally, merchants and issuers can download resources from the site, including training FAQs, infographics, and communications best practices, in addition to other elements.
For merchants who have not yet begun their EMV migration, here are four steps to follow:
- Start with a business plan: Outline how long it will take to enable EMV transactions, as well as any investments that could be associated with the transition.
- Determine your equipment status: Older POS terminals won’t work with the new chip-enabled cards. Newer terminals may already have hardware capable of supporting EMV transactions, but would still require updating to be enabled. Conduct an inventory to determine which of your terminals need upgrading. When purchasing new EMV-compliant equipment, make sure that it also supports contactless and mobile payments so you can be ready to accept all payment options for your customers.
- Invest in training and EMV awareness: The process for using EMV cards will be new for both your customers and employees. To make it as smooth as possible, managers and employees at all levels need to be familiar with the new equipment and how to handle the transactions, as well as any concerns that customers are likely to have.
- Begin your migration now: Moving to EMV requires significant effort. Also, with banks now issuing chip cards, merchants that aren’t prepared to accept them may find themselves at odds with their customers as they become aware that chip cards are a safer way to pay.
Businesses that embrace this new technology and start their deployments now will experience the benefits of greater security and more satisfied customers when they are able to seamlessly use their newly issued chip cards.
For merchant-related EMV information and downloadable resources, visit the Discover Network website at http://www.discovernetwork.com/chip-card/
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