Three Critical Misconceptions About EMV
The EMV migration is rolling full steam ahead in the United States and it’s a tectonic shift of the nation’s payments infrastructure.
Banks and card issuers are sending out chip cards to their customers, while retailers are deploying new terminals to support them.
As for how these new chip cards work, they can either be inserted into a terminal to run a chip card transaction, or swiped as you would use your magnetic stripe card today, if the terminal doesn’t yet support chip transactions.
This change may trigger questions for consumers and merchants that need to be answered in order to ensure a smooth transition.
Here are some top misconceptions about chip cards, and what you need to know before October’s EMV Fraud Liability Shift.
Misconception #1: Every merchant must be EMV-ready by this October
The October deadline for the EMV Fraud Liability Shift means that new rules will go into effect around the financial liability for fraud losses, depending on which party has implemented the least secure technology. This financial responsibility could be placed on merchants, merchant acquirers, or issuing banks and financial institutions if they are not EMV-enabled, but if all parties are EMV-enabled, the liability typically stays with the card issuer.
These liability rules are in place to drive swift adoption of chip cards, which are safer and more secure than traditional magnetic stripe cards when used in a “face-to-face” card-present environment.
However, not all terminals are included in this year’s deadline.
Automatic fuel dispensers and ATMs have deadlines pushed out through 2016 and 2017. Therefore, some merchants are staggering and prioritizing their deployment to align with industry timelines.
Misconception #2: Every merchant will be EMV-ready
Estimates for the number of chip cards issued and the number of terminals enabled for EMV in the United States vary across industry groups and associations.
Some groups, such as research firm Aite, predict that by the end of 2015, 70 percent of credit cards and 41 percent of debit cards will be EMV-enabled, and 59 percent of terminals will be chip-enabled. Mercator Advisory Group estimates that 49 percent of terminals will be EMV-enabled.
It’s important to note that the U.S. payments market is complex, which has affected how quickly merchants can overcome this complexity in order to migrate to EMV technology.
While some retailers have already made significant progress toward updating for EMV, other merchants are still evaluating the best path forward for their business. However, if delayed too late, those merchants may become the next target for fraudsters, who look for opportunities to find the weakest link.
Some merchants may not be ready for EMV yet, but should continue to work diligently in order to avoid becoming the target of fraud in the future. Additionally, as more and more merchants become EMV-ready, those who are not ready may create an inconsistent payment experience for customers, who will eventually expect to insert, rather than swipe, their new cards at most terminals.
Reterminalization may prove to be a slow process, but one of the ways to combat this is an active and insightful merchant education campaign.
“We believe in providing ongoing education and resources to our merchant partners, which is why we created an online EMV Resource Center on our Discover Network website,” said Ellie Smith, Head of the Discover Chip Center of Excellence.
“The website offers resources to help merchants, acquirers, VARS, and other parties better understand the migration to EMV, and provide documentation and guidelines that will help them execute their migration more effectively. The more prepared we and our partners are, the smoother the transition will be.”
Misconception #3: EMV cards aren’t really more secure than magnetic stripe cards
There has been a lot of misinformation in the marketplace around the way that EMV works, which has led to some consumers believing that chip cards are less secure than magnetic stripe cards.
With EMV, every time you complete a transaction, unique data is created, making it very difficult for hackers to copy and use your credit card information.
While some consumers have concerns about fraudsters reading the chip from nearby, or the chip being able to track their location, these concerns are false.
The ability for card information to be taken by a scanner in close proximity is a myth and, in fact, the data on the chip is more secure than the information found on a magnetic stripe.
Additionally, an EMV chip is not a tracking device and does not have personal information stored on it. When the chip card is inserted into a chip-enabled terminal, it communicates with the terminal to process the transaction more securely.
An effort must be made to communicate with customers across multiple touch points, including through direct mail and online channels, prior to and after issuance of their new chip card.
“EMV brings greater security to transactions, in particular by reducing the potential for fraudsters to create counterfeit cards due to the dynamic data created during a transaction,” Smith explained. “Discover has been actively communicating the benefits of chip cards, and how to use them, to our cardmembers over the web and when we issue them new cards.”
As we continue this migration, EMV will bring greater security and safety to U.S. consumers’ card-present transactions.
Of course, the U.S. is a huge market, and migrating to EMV will take a significant effort from all stakeholders in the payments industry.
Luckily, many U.S. consumers and merchants are becoming more comfortable with emerging technologies, and financial institutions and merchants should make every attempt to educate, and more importantly, dispel these misconceptions.