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EMV Terminals Explained

As of October 2015, merchants can be held liable if for certain fraudulent transaction involving an EMV chip card without using EMV POS technology. The U.S. is the last major market to use the traditional method of swiping a card through mag stripe readers, which is largely the reason the country generates more than half of the world's credit card fraud (1).

Today, the swipe method is second-nature to both merchants and consumers, which means the shift to EMV may cause confusion for many. The cost of investing in new technology may seem daunting to some businesses, but the frustration that may result from the high fees associated with fraud chargebacks may encourage merchants to upgrade their technology. Understanding EMV terminals and how they help merchants prevent fraud is important and will make it simpler to choose the right technology available to their business.

EMV terminals: Simpler than they seem 
Aside from the act of swiping a card, not much has changed with regard to running a transaction at the point of sale. EMV terminals – whether they're integrated into an all-in-one POS system or exist on their own as a separate card reader – accept payment from EMV-enabled chip cards using two methods: tap or insert. In order to allow the terminal to read the card and verify it's authenticity, merchants must either insert the card into a chip reader or tap it against the EMV terminal. Either method will enable the technology to accurately read the card’s unique chip.

Unlike the swiping a mag strip card, processing a chip card requires inserting the card and leaving the card stationary in the reader throughout the duration of the transaction, similar to some ATM transactions. Once the card has been read and the total confirmed, the card can be removed. While some have expressed concern over the potentially longer wait due to chip reading time, in reality, EMV terminals work similar to the majority of non-EMV terminals active today.

What goes on behind the scenes 
Ultimately, the biggest change that comes with EMV chip card technology is the processing that takes place on the back end. The whole point of EMV-enabled cards is to provide added security with unique encrypted codes that makes it nearly impossible for fraudsters to duplicate cards using a customer's sensitive information.

As EMV Connection explained, EMV transactions perform two key steps associated with the authentication process (2):

1. Transaction information is sent to the card issuer along with a transaction specific cryptogram that lives in the EMV chip. 
2. The issuer either authorizes or declines the transaction in real time.

Reluctance regarding the literacy and adoption of new technology should not hinder merchants from investing in EMV terminals. As it becomes the standard for U.S. card-present transactions, EMV acceptance will reduce fraud – and the cost associated with it – for both merchant and consumer alike.

  1. http://blogs.wsj.com/corporate-intelligence/2014/02/06/october-2015-the-end-of-the-swipe-and-sign-credit-card/
  2. http://www.emv-connection.com/emv-faq/#q20

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