**Understanding EMV Compliance Laws: What You Need to Know**
Here are some key points to keep in mind regarding EMV compliance:
– Businesses must be EMV compliant to avoid liability for credit card fraud.
– EMV compliance necessitates the use of EMV card readers for processing credit card transactions.
– Even if a business is EMV compliant, there are still situations where they could be held liable for fraud.
– Accepting credit cards involves inherent risks, as hackers constantly look for ways to steal customers’ credit card information for fraudulent purchases.
It is reassuring that many credit cards offer zero fraud liability protection, safeguarding customers from fraudulent charges. Additionally, under the Fair Credit Billing Act (FCBA), customers are only liable for up to $50 in fraudulent charges. However, not having an EMV-compliant point-of-sale system for chip credit cards can be a costly mistake.
**An Overview of EMV Compliance**
EMV cards, also known as chip cards or IC cards, store data on integrated circuits rather than magnetic stripes. These cards create dynamic data with each transaction, making it challenging for fraudsters to replicate or clone cards, thus enhancing security. EMV cards can also store loyalty program information for convenient use at participating merchants.
**A Real-Life Example**
Daniel Vasquez, owner of Dynamic Auto Movers in Miami, shared a cautionary tale about the consequences of not using an EMV-compliant system. Facing chargebacks totaling $15,000 and increased processing fees due to non-compliance, Vasquez realized the importance of upgrading to an EMV-compliant system. Following the upgrade, fraud rates decreased, and clients felt more secure engaging with the business.
**Chip Card Protections**
EMV protection is provided by a chip embedded in the card. Chip-enabled credit cards—whether Chip-and-PIN or Chip-and-signature—generate unique transaction codes for enhanced security. These dynamic codes make chip cards significantly more secure than magnetic stripe cards, albeit slightly slower to process.
Before the advent of chip technology, credit cards relied on magnetic stripes for storing transaction data. Upgrading to EMV compliance not only helps prevent fraud but also fosters trust, enhances reputation, and adds long-term value to an organization.
Theft of data is a concern with magnetic stripe credit cards, as hackers and thieves can easily “skim” this information. However, chip credit cards provide added security, although theft is still possible through a method known as “shimming.” Thieves use a small device called a shim that fits into a card reader slot to capture and save card information, enabling them to create fraudulent magnetic stripe cards with the stolen details.
EMV technology, which includes chip-enabled cards, aims to reduce credit card fraud for consumers and minimize chargebacks for businesses. Making a purchase with an EMV card involves a different process compared to swiping a magnetic stripe card. Cardholders must dip or tap their card at the terminal, generating a unique token for the transaction. They then either enter a PIN or provide a signature depending on the card type.
The EMV compliance standard shifts liability for fraud losses to the least compliant party between the merchant and card issuer since October 1, 2015. Despite the deadline and the increasing adoption of chip cards globally, many businesses have yet to upgrade their payment systems to be EMV-compliant.
As a business owner, becoming EMV-compliant is essential to minimize the risk of liability for credit card fraud and chargebacks. While non-compliance does not result in government fines, you could be held responsible for fraudulent transactions if you fail to upgrade your payment systems. It is recommended to ensure compliance with the EMV standard and switch to EMV-compliant systems to protect your business.
Make sure to upgrade your point of sale systems to EMV-compatible card readers. Additionally, ensure that your mobile readers can accept chip cards. Services like Square provide EMV-compliant readers suitable for small businesses. If you process EMV credit card transactions without an upgraded EMV-compliant terminal, you may be held liable for any resulting fraud. This is because, even if the card issuer is compliant, your non-compliance due to an outdated card reader could make you accountable.
Even if you have an EMV-compliant card terminal, beware that manually inputting card information instead of using the terminal could make you liable for fraudulent transactions. You are not likely to be held responsible for fraudulent transactions if you process a magnetic stripe card on your upgraded EMV-compliant terminal. Similarly, processing an EMV credit card on a compliant system and experiencing fraud should not result in liability since you are adhering to industry standards.
Consider partnering with a reputable payment processing company like PayPal, Clover, or Shopify to mitigate liability risks and minimize stress. Small business owners should ensure they keep copies of credit card receipts and relevant documentation, avoid manually entering card information for EMV transactions, and maintain records to defend against customer chargebacks. Upgrading to EMV technology is crucial to safeguard your business from potential fraud risks associated with outdated systems.
Businesses can ensure they are EMV compliant by installing EMV-compliant card POS systems and relevant software to process chip-and-PIN and chip-and-signature cards. Accepting payments via digital wallets like Apple Pay and Google Pay is also recommended. Many existing terminals already include this technology or offer it as an upgrade.
The cost of implementing an EMV-compliant system can vary greatly, ranging from free options to thousands of dollars. Businesses need to consider expenses such as equipment, software, internet connection, training, maintenance, licensing, inventory, reports and analytics, and processing fees.
When choosing an EMV-compliant system for your business, the U.S. Chamber of Commerce suggests the following tips:
– Understand your business needs.
– Connect with vendors who can meet those needs.
– Identify areas where you may need assistance, as each system has its own strengths, weaknesses, tools, and features.
– Establish a budget and allocate resources accordingly.
– Ask relevant questions to determine which system aligns best with your requirements.
– Select a system that can adapt and grow along with your business.
