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EMV Chip Cards: Separating Fact from Fiction

By Ray Moorman

Q: What is U.S. EMV?

A: EMV stands for EuroPay, MasterCard®, Visa®, the three entities that worked together to create worldwide standards for the chip card to ensure global interoperability. EMV is a payment method that combines a plastic card with integrated circuit chip (ICC). An EMV card uses the ICC to hold the account number and other sensitive data instead of using a magnetic stripe. The chip also contains logic for transaction processing and risk management.

EMV adoption in the rest of the world has been a gradual process that has taken years to decades to penetrate.

The U.S. will need to modify many of its payment process to fit into the EMV model. A great source of information on EMV, including historic information and recent announcements is the EMVCo™ website, www.emvco.com

Q: Do I have to implement EMV?

A: No, there is no mandate. Merchants should consider the following when or if they should implement EMV:

• How will EMV impact my line speed?
• What is the total cost of implementation?
• What's my current fraud chargeback liability?
• Does moving to EMV make sense in light of the potential impact to my business?
• Are there other security solutions available that can meet my needs?
• If I don’t do EMV, how can I make sure my cardholders are protected at my POS?

In addition, merchants should meet with their reseller to better understand EMV solutions for your specific POS and additional security measures.

Q: Why EMV Now?

A: U.S. card present fraud is above the world average and continues to increase. EMV supports enhanced verification methods such as PIN and Signature verification. In October 2015 there will be a fraud chargeback liability shift for merchants that choose not to implement EMV. In addition, starting in 2015 U.S. issuers will begin to issue more cards that will have EMV chips on them. In fact, the Payments Security Task Force (PST) predicts that 575 Million U.S. cards EMV cards will be issued by the end of 2015. Q: What is the October 2015 liability shift? A: A liability shift will occur in October, 2015—the liability for fraudulent transactions will move from card issuers to merchants if an EMV card is presented for payment at the merchant and it is swiped or entered manually and the transaction is fraudulent. In this scenario the merchant would be liable for the fraud, not the issuer.

Q: Will cards still be issued with mag stripes and will my existing equipment still work after the liability shift?

A: Cards will still be issued with mag stripe for the foreseeable future, but for how long is hard to state with certainty. As an example, EMV is over 5 years into its implementation and banks are still issuing cards with mag stripes. We are confident that the card brands and issuers will give the merchant community sufficient notice if they choose to stop issuing cards with mag stripe capabilities.

Q: Should I get an EMV ready terminal that is separate from my POS? A: No, there are EMV peripheral devices that Vantiv Integrated Payments is certifying that will work best with your specific POS system and your type of business. Vantiv Integrated Payments will soon be publishing a roadmap of devices that we plan to take through the EMV certification process for our EMV solution. Furthermore, there is a big difference between EMV “ready” and EMV certified. ‘Ready’ simply means that hardware has a slot for the card. Certified means the hardware, payment application and device software have all gone through an entire certification process. Getting a separate terminal will invalidate the full functionality of your POS system. Contact your reseller or point of sale provider to discuss device options that will work best with your system and best meet your business needs.

Q: Will I be charged more if don’t implement EMV?

A: EMV is a card network initiative. Currently, the card networks will be charging the same interchange rates for EMV and non-EMV transactions. Vantiv Integrated Payments has no control over network interchange rates or knowledge of changes in the future. Q: ¬I already have E2E encryption, do I have to implement EMV?¬ A: There is no mandate to implement EMV, but EMV is an important part of a card security solution. Coupling EMV with E2E encryption can provide merchants with the benefits of both the liability shift that EMV brings, along with PCI scope reduction when using E2E encryption.

Q: How does EMV work at the POS?

A: An EMV transaction will have a four step process:

1) An EMV card is inserted into a device attached to your POS system
2) The chip embedded in the card contains a unique key that is accessed by the reader in the device
3) The chips sends a unique cryptogram to the processor’s host with the approval transaction
4) The card is removed from the device once the transaction is complete In a chip and PIN transaction the customer is asked for his or her PIN number.

In a chip and Signature transaction the customer is asked to sign a paper receipt.

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