When it comes to credit, debit and other electronic payment cards, the good ’ol technology-savvy U.S. actually has been quite backward.
For years, the rest of the world has moved from the traditional, old-fashioned, mag stripe (that black, magnetic stripe on the back of a credit card) to a more secure solution that involves a small computer chip imbedded under the surface of the card. This evolution has left only the U.S. (and most of its territories) as the remaining holdout.
And not only is the U.S. out of step, its delay has made our part of the world a bigger target for fraud artists. Because the chip cards are harder to counterfeit, the bad guys have been “pushed” toward cards over here.
But all that is about to change.
Visa recently changed its policy on “chip” or EMV cards here in the United States, and it impacts merchants in a big way. (EMV stands for “Europay, MasterCard, Visa” and is the standard that was adopted for chip cards.)
Visa announced that effective July 1, 2015, any merchant that processes at least 75 percent of its transactions through a terminal that is EMV (both contact and contactless) compliant will be able to shift chargeback liability back to the issuing bank if that bank does not issue chip cards.
As most merchants know, the majority of the chargeback risk today is borne by the retailer. So the offer of a “get out of chargeback liability free card” is a pretty big carrot to wave in front of merchants and a huge incentive for moving them to accept EMV cards.
The assumption with this sea change, of course, is that issuing banks will move quickly toward issuing new cards with the EMV chip embedded in them.
The new cards will change the way a merchant processes a transaction. A chip card is “dipped,” not swiped, through a terminal and has to be left inserted in the terminal during the transaction. Once a transaction has been processed, either a signature or a PIN number is required to complete it.
Currently, transactions in the rest of the world are handled with a PIN number, but at this point the card networks in the U.S. have not announced whether a PIN number will be the standard here.
To qualify for the shift in chargeback liability and to be able to process these new cards, merchants will need to either add a peripheral device to their terminals or, in some cases, upgrade their credit card devices. Once all these coming changes are solidified, your merchant-processing provider should be communicating with you about choices available to you.
If you have questions, you should contact your merchant processing help desk.
John Mayleben is Michigan Retailers Association senior vice president, technology and product development, and a national expert on electronic payment processing. He is the first person in Michigan and among the first in the nation to receive the Certified Payments Professional designation from the Electronic Transactions Association.