EMV Chip Cards: Guide for Small Businesses
What Is EMV?
EMV refers to a technical standard for the microchips used in credit and debit cards and the devices used to accept them. These specifications were developed by credit card companies in order to establish a global standard that makes it possible for consumers to securely use their payment cards with businesses worldwide.
What Does EMV Stand For?
EMV is an acronym for EuroPay, MasterCard and Visa. These companies founded the organization EMV in 1994 to establish specifications that would ensure compatibility of chipped cards and payment terminals worldwide. The organization registered its EMV trademark in 1999, and since that time, the rest of the world’s largest credit card issuers, American Express, Discover, JCB and UnionPay, have each purchased equal shares and have representation in EMVCo.
What Do EMV Cards Look Like?
EMV-chipped cards can be either credit or debit cards and are the same size and shape as typical credit cards. The distinctive feature is the small microprocessor chip embedded into them. Most cards still have a magnetic stripe on the back so that your customers can continue using them at your business if you haven’t yet updated your equipment to include EMV credit card readers.
EMV Stats: Cards in the U.S.:
- The U.S. is now the country with the most Visa chip cards
- 70 percent of Americans have at least one EMV chip card in their wallets
- 40 percent of consumers haven’t made a purchase using a chip card in an EMV-enabled terminal
- 600 million EMV chip cards were issued in the U.S. in 2015
- 617 million EMV chip cards are expected to be issued in the U.S. in 2016
- 98 percent of payment cards will be EMV chip cards by the end of 2017
Where Did EMV Originate? A Brief History of the Chip Card
Microchips have been used as a security measure for credit cards in Europe since the 90’s, but as EMV chip card technology developed, U.S.-based businesses weren’t required to adopt the technology. Most felt that existing security protocols were sufficient, and merchants, banks and card issuers resisted the transition to EMV due to the costs they would incur as a result of upgrading to the new technology. However, as fraud increased in the United States and decreased in countries utilizing EMV standards, it became apparent that additional security was needed. To hasten the transition to EMV, the card brands announced new rules that went into effect October 1, 2015 that shifted the liability for card-present purchases made with lost or stolen cardholder information to businesses that didn’t meet EMV compliance for credit card processing.
Where Has EMV Been Adopted?
EMV is used in more than 80 countries in Africa, Asia, Europe and Latin America. Canada and Australia have also adopted EMV technology. Nearly every region using this technology reports a decline in credit card fraud. Tim Appleby, a security strategist from IBM’s Security Intelligence, notes a significant decrease of credit card fraud in countries that use EMV cards and cites a 25 percent dip in Australia, a 35 percent decrease in Canada and Europe, and an astounding 80 percent drop in credit card fraud in Brazil. Appleby suggests that the reluctance to adopt EMV technology in the U.S. has made it an easy target for fraudsters, since magnetic stripe cards are easier to counterfeit than chipped cards, has contributed to increased levels of credit card fraud attacks on U.S. businesses and consumers.
EMV Stats: U.S. Merchants’ EMV Adoption Status:
- 2 million U.S. merchant locations have chip-enabled terminals and are accepting payments made using EMV chip cards
- 22 percent of merchants are EMV-capable
- 53 percent of merchants plan on being EMV-capable within 12 months
Why Is EMV Important?
Implementing EMV is important because payment card fraud is rampant in the U.S., in part due to its reluctance to adopt EMV security standards. Because payment cards in the U.S. continue to use magnetic stripe technology, it’s a gold mine for criminals who counterfeit credit cards. Payment industry experts at The Nilson Report estimate that while 25 percent of the world’s credit card transactions originate in the U.S., it receives nearly 50 percent of the fraud.
Additionally, 90 percent of data breaches occur at small businesses, according to security experts from processing giant First Data. Small businesses are choice targets because criminals expect to find less stringent security measures and older technology that they can more easily access. Failing to implement EMV technology at your business signals to criminals that the security on your payment system may be out of date and easy to infiltrate.
Although EMV alone can’t prevent data breaches, it’s an integral part of a multi-layered security solution that can help you prevent fraud from occurring at your business.
Is EMV More Secure?
Magnetic stripe cards have been in circulation since the 1960s and use the same technology as cassette tapes. The data on the magnetic stripe is static, which means that it doesn’t change from transaction to transaction – making it easy to use once it’s been copied. And because it’s an old, familiar technology, it’s been adapted for other uses so the tools and materials needed to copy and duplicate magnetic stripe cards are readily available online.
EMV is more secure because it’s a newer, more sophisticated technology. The EMV chip generates a unique code that’s only valid for the current transaction. This makes it much more difficult for criminals to intercept and replicate usable data. If, however, a thief were able to skim the data, the data would include a previously used transaction code and the transaction won’t go through.
Four Benefits of Accepting EMV Chip Cards
You should consider several factors if you haven’t yet adopted EMV technology at your business. When you upgrade and implement EMV-ready equipment, you accomplish the following:
- Protect your business against counterfeit fraud
When your customer uses his or her EMV chip card with your EMV card reader, your equipment verifies that the card is valid. This gives you peace of mind because you don’t need to worry and wonder whether you’ve processed a counterfeited card.
- Protect your business against fraud liability
The main benefit that you receive when you upgrade to EMV-compliant equipment is protection from fraud liability. Because of the October 2015 liability shift, if you fail to upgrade your equipment, you are considered the weakest link in the payment chain, and any liabilities resulting from counterfeit fraud at the point-of-sale fall on you. By upgrading to EMV-compliant equipment, you shift the liability for counterfeit fraud back to the credit card companies.
- Let your customers know their payment data is safe
No one wants his or her information hacked. EMV compliance lets your customers know that when they do business with your company, they don’t have to worry about their cards being skimmed or their data being compromised.
- Frustrate fraudsters
Using EMV technology discourages criminals from targeting your business because it makes it tougher for them to obtain and replicate usable payment card information. Countries that use EMV report significant decreases in counterfeit credit card fraud since adopting this technology.
How Does EMV Affect My Business?
EMV regulations affect all businesses that accept credit and debit cards in person, whether your business is large or very small. By upgrading to EMV-certified equipment and attaining EMV compliance as necessary, you shield your business from the EMV liability shift that transfers the costs associated with fraud from card issuers to merchants.
Additionally, EMV technology offers your business another layer of security against credit card fraud. Because the microprocessor chips are harder to replicate than the magnetic stripe on older cards, it’s more difficult for thieves to create counterfeit cards that they can use to purchase goods in-person at your business’s point of sale.
What Could EMV Non-Compliance Cost My Company?
If you decide that the cost of upgrading your processing equipment to meet EMV standards is too expensive or if you think your business is too small for fraudsters to be interested in, it’s important to reconsider. You need to evaluate whether your business can afford the charges and fees that you would be responsible if a fraudulent credit card were to be used at your point of sale. Because of the EMV liability shift, if you’re not EMV compliant, your business is at risk for fraud liability every time a customer presents a chipped card and you swipe the magnetic stripe to initiate the transaction instead of dipping the chip.
Is EMV the Same as PCI?
Like EMV standards, Payment Card Industry (PCI) data security standards (DSS) aim to reduce credit card fraud and protect your customers’ payment data. However, the approaches are different. EMV technology secures the data on the card. PCI compliance ensures that you, the merchant, keep your network secure and updated and that you restrict physical access to cardholder data.