EMV chip technology is currently rolling out to consumers and merchants based in the United States. These chips help 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, which will help eliminate in-store fraud. However, there are a few things that as a merchant you’ll need to know sooner rather than later where this technology is concerned.
The Liability is Shifting
In October of this year, in-store counterfeit fraud liability will shift to the party that has not adopted the chip technology, whether this is the financial institution backing the card or the merchant who hasn’t adopted the necessary equipment to use this technology effectively. Here are the rules that will affect all merchants starting in October.
If a traditional magnetic stripe card is swiped by the customer at a magnetic stripe terminal and the purchase is a counterfeit transaction, the merchant is not generally liable, just like today.
However, if a chip card is used at a traditional magnetic-stripe only terminal. If the purchase is counterfeit, the merchant will generally be held liable, because the issuer (Visa, Master Card, et al.) has invested in the technology to make the transaction more secure, however, the merchant did not.
This rule is the one big rule that bears repeating, if you do not invest in the new EMV chip terminals, you, as the merchant, will be held liable for any counterfeit transaction that occurs within your store, regardless if the counterfeit card is a chipped card or a stripe only card.
When a chip card is used at a chip-enabled terminal that has been activated by the merchant, if the purchase is a counterfeit transaction, the merchant will not be liable, and the issuer will continue to bear the responsibility of the fraudulent activity.
While these rules seem to be putting the squeeze onto the merchants, the bright side is that when both parties, merchant and issuers adopt the EMV chip technology, this is predicted to virtually eliminate counterfeit fraud due to the security technology embedded within the EMV chip.