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Is your business EMV Compliant? Why EMV readers protect your business against credit card fraud liabilities

As of October 1st, 2015, if your business is not EMV Compliant, you are completely at risk of extreme financial losses in credit card fraud liability. To avoid this unnecessary stress, business owners are highly encouraged to upgrade their merchant equipment to the new EMV card readers. This way, you can process the new EMV cards safely while protecting yourself from any liabilities.

This is some basic information that you should know before upgrading to the new EMV card readers:

1. What are EMV cards and why do we have to use them now?

EMV cards are just like your regular credit cards, but with a new small modification that makes them safer, which is why we have started using them now. In fact, we are the last major financial market in the world to adopt EMV technology to process credit cards. By now, you should have either received one from your bank in the mail, or you may even have already processed some in your business, so you should be familiar with this description: EMV cards have a gold square on the front, usually located towards the upper right corner. And that is the only visible change, the rest remains the same.

That golden square is a microchip that generates a unique, one-time only cryptogram when processed using an EMV credit card reader. This is the important part and the reason why the new EMV cards are safer than the traditional credit cards: if somehow someone managed to steal the information contained in the microchip to make unauthorized purchases, the card would be declined because the information contained in the chip expires after each individual use.

But that is not the only reason why business owners should make sure that their stores are equipped with EMV card readers. There is a new law that came info effect on October 1st, 2015, that shifts the financial liability from merchants to business owners in case of credit card fraud.

2. What is this new law?

This new law, commonly known as ÒLiability ShiftÓ or ÒEMV lawÓ came into effect on October 1st, 2015, and it establishes the following:

If a customer pays for their purchase or services using an EMV card that has a microchip as described above, and that card is stolen, cloned, or otherwise compromised (so, if there is fraud), then the financial liability that would cover any and all of the losses related to that fraudulent transaction falls on whoever party is less EMV compliant.

Taking into account that pretty much every single financial institution in the country has issued the new EMV cards with the microchip, if one of your customers pays using that card with the chip, and you do not have the new EMV readers to process that card, then you are at risk for having to assume the financial loss of any unauthorized purchases.

LetÕs say customer ÒBob DoeÓ goes to the store and buys a set of drills for his DIY projects that costs $800. If Bob uses a stolen chip-card to buy the drills, and the store doesnÕt have the new EMV readers to process that card, neither the rightful owner of the card nor the financial institution that issued the card are responsible for the $800. Up until now, the store would get reimbursed the $800, and the customer would get the $800 back into their accounts, while the bank or financial institution that issued the card would lose the $800.

How to avoid losing money and putting your business at risk? Easy, by upgrading to the new EMV readers. According to the law, if the customer uses a stolen or compromised card to pay for services or products, and the store or contractor uses an EMV card reader to process that transaction, then the store is NOT liable anymore for any losses regarding the fraudulent transaction.

In this case, and once again, the owner of the card is NOT responsible for what Bob did with the card, and the store is NOT responsible either because they used an EMV reader to process the credit card. The bank, or the financial institution that issued the card, just like before October 1st, 2015.

3. What happens if I donÕt upgrade to the new EMV readers? Can I still process the new EMV cards?

Besides being at risk of severe financial losses due to credit card fraud, there are no penalties involved for business owners. The law only establishes that banks and financial institutions that issue debit and credit cards must issue EMV cards to their customers by October 1st, 2015, but it does not require business owners to upgrade their merchant equipment just.

You can still process the new EMV cards using the old credit card readers. The new chip-cards still have the magnetic stripe on the back, like traditional credit cards, so they can be swiped and processed that way also, but once again, this would leave both the customer and the business owner at risk of fraud and could incur in very damaging financial losses for businesses. Incidentally, the new EMV card readers can of course still process the traditional credit cards that do not have a microchip.

4. How much does it cost to upgrade to the new EMV readers?

The cost of upgrading to the new EMV readers really depends on the credit card processing system that the store currently uses. Obviously, older systems that may not have been upgraded in a while could be more expensive than upgrading more up-to-date card processing systems. In fact, some businesses may be able to update their whole card processing system by simply downloading an app. But whether you are one of those lucky businesses with just a few adjustments to make in their merchant equipment, or a more established or larger company that needs a more involved upgrade, the good news is that some companies are offering free EMV readers. Do your research and take advantage of the free EMV readers while they last!

If Bob uses a stolen chip-card to buy the drills, and the store doesnÕt have the new EMV readers to process that card, neither the rightful owner of the card nor the financial institution that issued the card are responsible for the $800. According to the law, if the customer uses a stolen or compromised card to pay for products or services, and the store or contractor uses an EMV card reader to process that transaction, then the store is NOT liable anymore for any losses regarding the fraudulent transaction.

In this case, and once again, the owner of the card is NOT responsible for what Bob did with the card, and the store is NOT responsible either because they used an EMV reader to process the credit card. You can still process the new EMV cards using the old credit card readers. Incidentally, the new EMV card readers can of course still process the traditional credit cards that do not have a microchip. Find out more about free EMV credit card reader