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

Will Magnetic Stripe Cards Ever Go Away?

by Intrepid Payment Processing

One of the moIMG_3449_lbst important mile stones in the history of payment systems in the United States arrived without much fanfare. On the first day of October 2015, the Europay, MasterCard, and Visa (EMV) standard became legally significant through what is known as the liability shift. As banks, merchants, consumers, and payments processors begin to implement the new system, one of the questions we are constantly hearing is: How long until the old magnetic stripe system goes away?

The days of the magnetic strip (magstripe) are far from over. Although the liability shift from the issuer to banks and merchants should be a strong motivator for everyone in the payments industry to adopt the EMV chip system as soon as possible, we will probably see the magstripe for a few more years.

The Strawhecker Group, a management consulting company based in Omaha, recently conducted a survey on American EMV adoption. The survey indicates that only about a quarter of all merchants were ready for EMV on its official October 1 date. The forecast at this time is that less than half of all merchants will be EMV compliant 12 months from now.

Although the liability shift is a pretty serious matter since it has the potential of affecting the bottom line of banks and merchants, there is no clear mandate to perform this upgrade. For this reason, we believe it may take a few years until the magstripe becomes a thing of the past, and the transition will be similar to what Microsoft has encountered with its Windows XP operating system.

Despite Microsoft’s efforts to convince users of the risks of using Windows XP, recent statistics published by data analytics firm Net Applications indicate that millions of people are still using the old operating system, which is installed in more systems than Apple OS X, Linux, and even the new Windows 10. The Windows XP stalwarts use it because it works, and thus they are in no immediate rush to upgrade.

With more than a billion magstripe credit and debit cards currently in circulation in the United States, issuers have a major task ahead of them in terms of switching cardholders over to the new EMV chip system. Furthermore, there are more than 10 million card readers in operation that also need to be replaced. This is a major undertaking, and there is one more factor to consider: the magstripe will be the system of last resort until full EMV adoption is complete.

Starting October 1, 2015, if a magstripe cardholder wishes to complete a retail transaction where an EMV card reader has been installed, a magstripe transaction will take place. Because this is a system that still works, we think it may take a few years before it goes away completely, similar to Windows XP.

Copyright 2015 Intrepid Payment Processing