U.S. banks are switching up the insides of your customers’ credit cards. They’re adding something called EMV technology, which stands for “Europay, MasterCard, and Visa.” Translation: Credit cards will be equipped with a super-small computer chip that’s extremely hard to counterfeit. If you’ve gotten a card recently, chances are it’s souped up with this technology.
Why the changeover? Here’s a crazy statistic: Almost half of the world’s credit card fraud now happens in the United States—even though only a quarter of all credit card transactions happen here. The banks want to rein this in ASAP by moving away from magnetic-stripe cards, which are much easier to counterfeit. The recent Target and Neiman Marcus security breaches also added motivation.
So how exactly will this affect your business? For starters, you’ll need a new processing device to read the information in the chip cards. This can get expensive. And come October 2015, businesses that don’t have an EMV processing device could be on the hook for fraudulent chip card transactions.
As you might imagine, chip cards are a pretty hot topic in the financial press right now. There’s a lot of information to sift through. And because any EMV card discussion usually mentions “fraud” and “liability,” it’s natural that it could put small business owners on edge.
Currently, if you run a fraudulent card, banks absorb the costs. Starting in October 2015, if someone pays with a fraudulent chip card, and you’re not set up with an EMV card reader, the banks will no longer be liable. So say, for example, a fraudster buys $30 worth of hot sauce from a restaurant with a counterfeit EMV chip card. If the restaurant doesn’t have a chip card reader to process the transaction, it could be on the hook for the $30.
Most of the world, including Europe, has been using chip cards for years. The United States is actually the last major market still using magnetic-stripe-only cards.