November 18, 2015
Card related financial fraud is not a laughing matter. In fact, this kind of financial fraud is one of the most commonly perpetrated crimes against individuals, and this is usually done with the use of cards that do not have the EMV chip. What exactly is EMV and what is this chip that is used with it? Why are cards equipped with this chip considered safer than those without it? Why is it high time that merchants switch to using cards that use EMV?
Let us start by defining what EMV is and what it stands for. EMV is short for Europay, Mastercard, and Visa – three companies that initiated the creation of smart card specifications aimed at making sure that there is interoperability between these different card companies. The specifications were also made with security features that helped prevent card fraud, and this is due to the embedded chip in each card. This standard, while began by the three companies mentioned earlier, is now owned by EMVco, which is a consortium that is made up of a number of companies that include American Express, JCB, Discover, UnionPay, and of course, Visa and Mastercard.
Switching to EMV brings with it numerous security features that benefit both the consumer and the merchant. This system helps prevent the proliferation of card fraud that stems from counterfeiting, theft, and even with lost cards. This system is also great for those who travel since these cards can be used with any EMV compatible terminal worldwide. This is because of the aforementioned interoperability initiated by the three companies that developed this standard.
EMV cards are more secure than your standard magnetic strip card due to the security features that come with these. These have card authentication, card verification, and transaction authorization procedures that help prevent the possibility of fraud. The first one makes sure that the card being used is indeed a valid one, while the second uses various verification methods to ensure that the cardholder is indeed the owner of the card being used in the transaction. The latter can be done with the help of pin numbers being sent to the owner’s mobile phone, or the card holder being asked verifying questions when large transactions are being made. The verification procedure is often dependent on the company that issued the card, as well as what method the card holder chose from various options presented by the card issuer.
You will see from above that most of these fail-safes are for the protection of the consumer. So as a merchant, you may ask, why should you switch to such a system? The reason is the EMV liability shift. This shifts the liability to the merchant that processed fraudulent transactions with the use of EMV chip cards on non-EMV compliant portals. This is what some merchants who do not want to switch to EMV are up in arms about.
While the shift to EMV is not mandated by law, doing so actually helps all parties involved. Not only does the switch help consumers protect themselves from fraud that stems from the use of fake, stolen, or lost cards, but it also helps the merchant ensure that they are not selling to those who are out to defraud others. The EMV liability shift is just a push in the right direction for both consumer and merchant protection.