Business owners around the world rushed to update their payment terminals to accept cards with EMV before the 2015 deadline. If you own a restaurant or retail store you’re probably familiar with the term EMV. However, many people don’t understand how the technology works. Are you curious about how it can help your business? Here is some basic information about EMV cards and how it can help protect your business.
What is EMV?
EMV is a new payment standard for merchants around the world. The term EMV refers to Europay, MasterCard, and Visa, the payment processing companies that developed the system. They created the technology to create a safer shopping experience for consumers and merchants. Cards with EMV or “chip cards” have an embedded electronic chip on the front that allows customers to process transactions securely.
How Does EMV Work?
First, customers have to insert their EMV card into the store’s payment terminal or point of sale device. The embedded chip automatically makes a payment and encrypts its sensitive financial data. The technology can prevent fraudulent transactions and chargebacks since new data is generated with each transaction. When the payment is complete, the customer can remove their EMV chip card from the payment terminal.
The deadline for companies to comply with EMV was October 1, 2015. Many businesses had to update their store’s credit card readers and other payment systems so they could be EMV compliant. The technology requires your point of sale terminal to have a specific reader or terminal that is compatible with chip cards. Although this may increase your expenses in the short-term, the technology can potentially prevent your company from losing lots of money to fraudulent transactions.
How Can EMV Protect Your Business?
EMV can protect your business against fraudulent chargebacks and charges. Before EMV, the merchant was financially and legally responsible if there was a fraudulent charge. Now the entity with the less secure payment system that does not accept EMV payments is liable. For example, if you have a customer that comes in and wants to make a purchase and your payment terminal can’t process their chip card, you may be responsible for any fraudulent charges since the EMV technology could have prevented it.
However, stores that accept EMV cards aren’t liable if the card is reported lost or stolen. If a customer tries to use their EMV chip card and your terminal can’t read it, you may have to use their card’s magnetic stripe instead. The store may be liable if the transaction is fraudulent or becomes a chargeback.
The new regulations were designed to help protect the customer, banks, merchants, and payment processors from security breaches and fraudulent charges. Nine of the most popular payment companies, including Discover and American Express, voted to change the previous policies and update the payment systems by 2015.
Studies show that EMV has lowered the number of fraudulent charges in the United States. MasterCard recently reported that stores with EMV enabled payment technology reported a 54% decrease in counterfeit fraud costs between 2015 and 2016. Visa also conducted a study that revealed counterfeit fraud had decreased by 35 percent for stores with EMV enabled point of sale terminals during 2015 and 2016. Stores and other merchants that did not update their payment terminals to accept EMV experienced fraudulent charges at almost 80%.
Overall, EMV can help protect your company. The innovative technology can prevent fraudulent charges and other hassles that can hurt your business. EMV can make it easier for customers to make a secure payment when they want to buy an item.