EMV Liability Shift

Why it pays to adopt new technology

EMV chip technology is rolling out to consumers and merchants in the United States. EMV chip cards protect in-store payments by generating a unique, one-time code needed for the transaction to be approved. This feature makes it virtually impossible to counterfeit cards, helping to eliminate in-store fraud.

On October 1, 2015,

in-store* counterfeit fraud liability will shift to the party – either the issuing financial institution OR the merchant – that has not adopted chip technology. Understanding how this liability shift affects YOUR business can help protect you from liability exposure.  So, what does that mean to you?

Rule #1

A traditional magnetic stripe card is swiped by the customer at a magnetic stripe terminal.

Magnetic Stripe Cards

If the purchase is a counterfeit transaction, the merchant is generally not liable, just like today. 

Rule #2

A chip card is used at a traditional magnetic stripe-only terminal.

EMV Chip Card (at traditional machine)

If the purchase is a counterfeit transaction, the merchant generally holds liability, because the issuer has made the investment in chip technology to make transactions more secure while the merchant did not invest in upgrading to chip.

Rule #3

A chip card is used at a chip-enabled terminal that has been activated by the merchant.

EMV Chip Card (at chip-enabled machine)

If the purchase is a counterfeit transaction, the merchant is not liable, and the issuer will continue to bear the responsibility of counterfeit fraudulent activity.

The really good news is that when both parties adopt the new chip technology, overall in-store counterfeit fraud is virtually eliminated due to the security benefits of the chip.

So, what can you and your business do to limit your liability, if you do not want to invest in the new technology after October 1, 2015?

As usual, your best protection is to verify the card holder by verifying the ID.  If you have a new client, simply ask them for their ID to verify they are who they say they are.


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