Now Is the Time to Upgrade to Chip Technology

Protect your business from liability for fraud with EMV terminals. Deadline: Oct. 1, 2015.

By Navy Federal August 8, 2015

Following data breaches that affected millions of consumers, a major improvement in payment card security is underway in the United States. If your business accepts in-person credit and debit card payments from customers, you need to be prepared. It's time you made the switch to card terminals that process EMV (stands for Europay, MasterCard®, Visa®) chip cards. A shift in liability for fraud is coming in October, and using EMV, or what's called chip-enabled terminals, will protect you from liability for counterfeit fraud, should it occur in any of your card transactions.

Change on the horizon

Effective Oct. 1, 2015, Visa and MasterCard will no longer bear the liability for fraud unless the counterfeit transaction takes place with a chip card at an EMV terminal.* Instead, the liability will fall on either the merchant or the issuer of the card, if it's not an EMV chip card (sometimes called a "smart chip card"). The new policy assigns liability for counterfeit fraud to the party that hasn't made the investment in EMV chip cards (issuers) or terminals (merchants). Many card issuers are already sending their cardholders EMV chip cards that contain an embedded microchip. Beginning in April, Navy Federal will begin issuing chip cards to members as their cards expire or need replacement. The EMV technology offers superior protection against fraud because the chip generates a different, single-use code for every transaction. Chip technology greatly reduces a criminal's ability to use stolen payment card data by introducing dynamic values for each transaction. Other areas of the world, including Europe, Asia, Canada and Mexico, have been using cards with embedded microchips for years, but adoption of the technology has begun more recently in the United States. Countries where EMV technology has been employed have seen significant reductions in fraudulent transactions.

Take steps to protect your business

  1. Identify what type of card terminal you have currently. Some merchants' terminals already have a slot for chip card acceptance, but it may not be activated. If that's the case, you just need a minor software download from your payments processor.
  2. Replace your card reader(s) if needed. Navy Federal's partners, TSYS® Merchant Solutions and Square®, both offer EMV capable card readers. TSYS Merchant Solutions offers a variety of packages that include a free card reader, available now. Square will begin shipping chip-enabled card readers this spring for $29. When upgrading terminals for chip, consider the capabilities of the terminal to support additional payment innovations, such as contactless/NFC payments (Apple Pay™ is an example).
  3. Plan for updates. EMV is designed to enable implementation of stronger security over time. For merchants with multiple locations, it's usually worth the initial investment to purchase centralized terminal management software that allows you to update terminals remotely. It can help you prepare for continued EMV maintenance requirements and enhancements, particularly as innovation continues in the market.
  4. Train your employees. Inserting a chip card is a little different than swiping a stripe. The card should not be removed from the reader until the transaction is completed, which may take a bit longer than magnetic stripe transactions. The payment won't be processed if the card is removed before the end of the transaction. Your employees may have an easier time with the adjustment if they understand the reason behind it.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.