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The date is set for a major change to the way credit card processing in the United States is handled. Starting in October of 2015, Visa and MasterCard will shift to EMV credit card technology to replace the swipe-and-sign system that we’re accustomed to today. The seed for an EMV transition has already been planted, and Visa has led the charge with a roadmap for EMV adoption with an August 2011 announcement that outlines a merchant incentive and a fraud liability shift.

The EMV system, which is used widely in Europe and other parts of the world, makes it more difficult for criminals to obtain sensitive payment information and replicate transactions. Each EMV enabled “smart card” contains an embedded microchip and requires a PIN from the cardholder in order to complete a transaction. In other words, the microchip encrypts the smart card’s information, and the PIN adds another layer of protection for consumers; no PIN, no payment.

EMV satisfies two main objectives. It decreases credit and debit card fraud on card-present transactions through increased security, and it creates a consistent cardholder experience worldwide through a global payments standard.

So what does it mean for merchants? The progression towards the more secure technology will not be effortless. Merchants will need new equipment to communicate with the microchip-enabled smartcards, and consumers will be required to obtain and use the new cards. Another aspect of the transition will be a shift in liability under the EMV system, which could serve as an incentive for merchants and consumers to adopt the new technology. After the system is made available, liability for fraudulent transactions will be held by the party with the lesser technology. For example, if a merchant is not equipped to process a transaction with a microchip-enabled smartcard and fraud occurs as a result, the merchant will be responsible for the loss. Likewise, if a consumer is late to the EMV party and pays via swipe-and-sign when the merchant is EMV-enabled, the consumer will be liable for any losses resulting from compromised data.

As we move closer to the transition date set forth by Visa and MasterCard, merchants will start to see more and more customers with these smart cards. While there will undoubtedly be some growing pains during the shift, especially for merchants, the gains made in consumer protection and decrease in fraudulent activity will prove to be beneficial for both sides of the transaction. Business owners are encouraged to check with their merchant account providers well in advance of October 2015 to make sure they’re equipped for the change.

The Bottom Line
All U.S. merchants are responsible for making hardware and/or software upgrades necessary to support the new EMV technology. The consensus among the major card issuers is a push for increased security of data which translates into less vulnerability to data breaches and the costs associated with card fraud. Protecting consumer data is everyone’s responsibility and in the best interest of your customer. Most businesses cannot afford the damaged reputation and drop in sales that result from a data breach and scammed customers. Many vendors are ready with equipment that will accommodate both old and new EMV technology, and here at Servistree we have the solutions and expertise to help you make the transition smoothly without breaking the bank.

Give us a call with any questions about your credit card and payment processing needs at 1-866-944-3244. Or visit our website www.servistree.com. Keep up with the latest news and information on credit card processing and mobile payments along with other small business news by subscribing to our blog by clicking here.