The EMV Implementation Trudge
Payment processors, gateway providers, POS vendors, and retailers alike have scrambled since 2012, when the major U.S. credit card issuers announced their plans to implement EMV, a technical standard to transmit payment data through a computer chip (in lieu of the traditional magnetic strip). To incentivize businesses to make the change quickly, Visa, Mastercard, and other card issuers created a policy that after October 1st, 2015, in an instance of card-present fraud, whichever party is the least EMV-compliant will be liable.
If you haven’t upgraded your business’s hardware yet to accept EMV credit cards, and if you’ve run into roadblocks that are out of your control, you’re not alone. According to a September 2015 survey by The Strawhecker Group, just 27% of merchants anticipated being EMV-ready by October. What’s more, they predicted that only 44% will adopt EMV by the end of the year. In fact, it’s expected to take approximately 2 years until most merchants convert.
From a business’s perspective, the transition can easily seem like a confusing mess--especially since stores have to rely on their POS vendor/reseller to provide and implement new hardware. For these companies though, they’re often stuck between a rock and a hard place. Kevin Kogler, President of Microbiz POS, described his experiences with The Point of Sale News, saying, “We are finding that the processors, gateways, and processing equipment vendors are falling behind schedule. This is particularly acute with many of the smaller players finding that they do not have the financial and employee resources to meet the timing of the looming EMV deadline.” The overwhelming feeling is simply that it isn’t realistic to expect the entire nation’s payment system to move to a new standard in a matter of a few years.
But the most important question, perhaps, is, once the majority of merchants are converted, how will this cut down on fraud? First and foremost, EMV only pertains to card-present transactions, where the computer chip in the card interacts with the card reader. This segment of fraud (commonly involving counterfeit credit cards with replicated magnetic strips) likely will decrease considerably as an EMV card cannot be replicated. That said, card-not-present transactions (like phone and eCommerce orders) will not see any new fraud protection benefits. Moreover, it’s likely that as the U.S. implements EMV, card-not-present fraud will surge since card-present fraud will become more difficult to commit. Ominously, in the United Kingdom, during the 3-year period after the country implemented EMV, card-not-present fraud increased by 79%.
While implementing EMV and mitigating card-present fraud liability is the main challenge on the minds of merchants today, stores should use the post-holidays respite to ensure they have a plan for combatting card-not-present fraud moving forward. For stores with eCommerce websites, integrating a payment gateway that verifies payment data is a sound initial step for protecting yourself. Inevitably, though, while this will help you minimize your exposure and ultimately help bolster your case in instances of chargebacks, there is no such thing as perfect protection. To minimize the time you waste fighting fraud, research common signs of fraudulent transactions and educate key staff. EMV will help shut the door on in-store purchase fraud, but there’s a lot of vulnerability with online ordering.