More Chips, More Security: The Impact of EMV and NFC on the Credit Card Processing Industry

by Intrepid Payment Processing

The credit card processing industry is currently in a state of flux. Every year, payment technologies are expanding at dizzying rates and both consumers and merchants are being confronted with arrays of card options, payment methods and security protocols that they have never seen before. EMV, or embedded chip cards, and NFC, the near-field communication technology that enables mobile phone-based payment systems, are available to more customers in 2016 than ever before and businesses are feeling the pressure to adapt. In order to pursue modern customers in an ever-changing marketplace, small and large merchants alike are being forced to reassess their credit card processing systems and their very relationship with non-cash transactions.

EMV embedded chip cards are gaining popularity for many reasons, but many in the credit card industry recognize that their rise is largely due to the average consumer’s commitment to credit card information security and the clear advantages EMV holds in this department. The advanced encryption in these chips is engineered specifically to prevent massive data breaches and to hide personal information from would-be hackers.

Another nascent technology is the field of near-field communication, the advent of which has made Apple Pay, Android Pay and Samsung Pay all possible. Although a recent survey by Accenture showed that only about 18% of surveyed North Americans are currently using any of these products, the industry is on the rise for the simple reason that people are relying on their mobile devices to accomplish more every year. It is inevitable that mobile pay applications are the way of the future, especially when one considers that 23% of current users are Millennials.

The rise of these new technologies will have a major impact on the credit card processing industry, if only because they are so closely related. The chip technology in EMV cards is very similar to the technology in an iPhone 6 or Apple Watch that allows users to pay for items with mobile transfers. As chip technology advances, both EMV and mobile pay devices will advance at an equal rate.

Additionally, most credit card processing services that are equipped to handle EMV cards are also able to support mobile payments. As more retailers take the plunge and enable chip card payments, the mobile payments industry will get a boost without even having to do anything. Retailers, wary of recent changes in liability legislature that pin blame for data breaches on merchants rather than on banks, are taking to the new technology in droves. Any change in the credit card processing industry will hinge on whether consumers follow.

Copyright 2016 Intrepid Payment Processing

We’re Past The Deadline; Is Everyone Ready?

by Intrepid Payment Processing

EMV is a new global standard for credit and debit card transactions at the point of sale. In the United States, the liability shift went into effect October 1, 2015, however, the migration to EMV use has been slower than expected and many retailers have not made the switch.

What’s the problem?

Because EMV-compatible cards have an embedded computer chip in them, new equipment is required on the retailer’s end…and it’s not a cheap upgrade. Ultimately, though, they should want this because the smart chips create a unique transaction code which dramatically reduces the opportunity for fraud. (And the banks are no longer going to assume the responsibility for non-EMV transactions.)

That said, a recent Debit Issuer Survey revealed that 90 percent of financial institutions in the country have begun issuing EMV-equipped cards; although only 25 percent of the total number of cards out there will be equipped with EMV by the end of 2015.  While bigger retailers like Walmart and Target are upgrading terminals to accept EMV cards, smaller merchants are much slower to upgrade. The Strawhecker Group found that about 27 percent of smaller merchants were ready as of October 1, 2015.

It’s not all that surprising that merchant acceptance has been sluggish. As consumers become more familiar with the EMV process, they will begin to expect it when they transact and that’s what will probably drive widespread acceptance.

Copyright 2015 Intrepid Payment Processing

Compliance Weak After EMV Liability-Shift Deadline

by Intrepid Payment Processing

October 1, 21015 was a momentous date for the American merchant payments processing industry. We are now in the Europay, MasterCard, Visa (EMV) chip card era, which means greater security and compliance. EMV is not only a technological shift; it is also a major shift in terms of liability and responsibility for credit and debit card issuers as well as for merchants.

As the situation currently stands, any business that accepts a physical card transaction could be liable in case of fraudulent use. In the past, merchants in the United States had some responsibility insofar as taking measures to prevent card fraud, but liability ultimately fell on the card issuers; that is no longer the case. The EMV system is designed to provide more security than the old magnetic stripe system; to this effect, merchants who do not upgrade to the new system are essentially on the hook should fraudulent use occur at their business.

It is important for American business owners to realize the gravity of the EMV shift. A couple of years have passed since this matter was stressed in the wake of the massive data breach suffered by giant retailer Target; since that time, a little more than a quarter of all merchants in the U.S. had upgraded their terminals. It is estimated that less than half of all merchants will be EMV compliant by next summer. What is truly concerning is that not all business owners who accept card payments are fully aware of the implications of the EMV shift.

A week after the October 1 deadline, the Small Business Committee at the House of Representatives looked into how much, or how little, progress has been made with regard to the EMV upgrade. One Committee member explained that the EMV transition has caught many merchants off guard. Even in the best case scenario, it may take two or more years for 60 percent of merchants to upgrade.

Considering how sizable the American retail landscape is, the fact that more than a quarter of all merchants have already upgraded their systems is auspicious. The EMV shift may not be off to the greatest start, but what has been accomplished thus far amounts to a lot in terms of compliance.

Although the EMV upgrade is not a mandate, the liability shift should be of the utmost concern for merchants. More than half of all credit and debit card fraud takes place during physical transactions, and merchants are now liable if they do not comply with the EMV shift. Criminals are aware of the EMV shift, and they are planning to make final runs on the old magnetic stripe system; for this reason, it is in the best interest of all merchants to upgrade as soon as possible.

 

Copyright 2015 Intrepid Payment Processing