What are EMV credit cards? These credit cards were introduced in the 1980s to prevent in-store credit card type fraud. They are different than older type credit cards in that they have embedded security chips as well as the magnetic stripes for credit card readers. These cards need EMV-ready terminals to fully work. These security chips are difficult to copy or clone. The actual card must be in hand to make an in-store purchase. These cards were first used in other countries worldwide and finally in the United states. The reluctance of United states business to purchase the newer card reading machines led to new rules .
2015 EMV Update
On the date of October 1st, 2015, new rules were put into effect that can cause merchants and banks who do not have the new card readers in use to be more liable for fraudulent losses. The rules make it more important for merchants and banks to be EMV-compliant. This is important because the new cards are only most effective if they are easy for customers to use at all locations that they shop. Two liability rules apply:
- When customers are forced to use the chip cards on older terminals, the merchant will be liable for any fraudulent losses.
- When customers are forced to use older style cards on EMV terminals, the banks that issued the outdated cards will be liable for fraud losses.
These rules are designed as incentives for card issuing banks and card-accepting merchants to make the switch to the newer terminals and chip cards.
How Has The Retail Industry Adjusted In One Year?
So far the EMV Update for the universal rollout of EMV chip cards is not close to complete. 70% to 80% of the card issuing banks have sent their customers the newer forms of cards. Unfortunately, as few as 25% of merchants have adopted the new card reading machines. One reason for this lack of cooperation by the merchants is that they are expected to bear the cost of replacing their expensive card reading machines with even more expensive newer readers. Nationally, this cost to merchants could reach $2.6 billion dollars. The second reason for the low level of merchant compliance is that the new rules are not mandatory. Because of these factors, merchants may be waiting until their card readers wear out to replace them.
One Year In Impact Of EMV Chip Cards
After only one year, the purchases involving chip cards only account for five to ten percent of in-store purchases in the United States. Older markets using EMV chip cards to a greater extent have seen in-store fraud go down. Canada has enjoyed a 54% decrease and the U.K. has seen a 60% decrease in in-store fraud since adopting the EMV chip cards and readers. The EMV Update needs more time in the U.S.
At the same time, card not present forms of transactions such as online sales have seen large increases in fraudulent activity. As in-store, card present sales make fraud more difficult, the criminals are switching to areas with fewer safeguards. Merchants who rely on online or over the phone sales will need to find a way to protect themselves and their customers from fraudulent activity. To learn about credit card sale security online, visit this website.