The United States is currently undergoing a massive shift in the payments world – the adoption of EMV (short for Europay, MasterCard and Visa). EMV is a global payment system that replaces the traditional magnetic strip credit card found in the US with a chip-based authentication process. The new EMV cards contain a chip that creates a new, unique code during every transaction, in contrast with the current magnetic strip that contains one set of information that never changes. The constantly evolving data that comes with the chip prevents fraudsters from duplicating or counterfeiting credit card information in card-present transactions. The new change, and expected increase in mobile and online fraud as a result, demonstrates the increased need for merchants to use stronger authentication methods, including ID verification.
Come October 2015, all US payment terminals must have the proper technology implemented to accept EMV transactions or risk being held liable for fraudulent transactions made. Here are key considerations for both merchants and consumers ahead of the shift.
What Merchants Need to Know:
- EMV won’t decrease fraud overall. The shift to EMV is expected to lead to more secure in-person transactions. However, it’s also expected to lead to greater card not present (CNP) fraud, which has increased in every country after its adoption of EMV. For example, Canada saw a 54% decline in counterfeit and lost/stolen card fraud, but also had a 133% increase in CNP fraud from the start of the EMV migration in 2008 through 2013. Fraudsters’ shift to mobile and online transactions is exactly why merchants need to take extra precautions to protect themselves and their customers, including the use of security measures like ID verification.
- Make sure to upgrade. It’s essential to upgrade payment terminals to accept the new chip cards for point-of-sale (POS) transactions. Merchants who don’t will now assume more liability. Come October, businesses that do not accept EMV will now be held responsible for fraudulent transactions that would have been prevented with EMV.
- Don’t ignore the October deadline. Fraudsters will continue to try and game the system they already know, so merchants who do not upgrade to EMV-friendly payment terminals put themselves at higher risk for fraudulent transactions.
What Consumers Need to Know:
- How to pay. The new system isn’t terribly different for consumers making payments. In fact, newer credit and debit cards have already been upgraded to include the chip. In order to make an EMV payment, customers will need to insert their EMV card into a terminal slot and wait for it to process, rather than the swipe many are accustomed to with traditional cards.
- You probably won’t be using a PIN right away. Since many payment processors will not yet be equipped to handle chip-and-PIN transactions, customers will most likely only be required to give a signature at POS transactions, rather than memorizing a PIN.
- The transition won’t happen overnight. It will take time for the transition to EMV to occur. While the October deadline pushes for all payment terminals to become EMV-compliant, there won’t be 100% adoption right away. The American Bankers Association predicts only about 50% of banks and retailers to be completely transitioned by the deadline.
Businesses must be extra cautious when it comes to online and mobile transactions, and put increased security measures in place to protect themselves and their consumers ahead of the EMV shift and the expected increase in CNP fraud. Solutions like Jumio’s Netverify help merchants authenticate their users in real-time and provide real-time ID verification, reducing fraud potential and chargebacks while simultaneously saving time and money.