5 Things Contractors Should Know: Accepting a ‘Chip’ Card

The EGIA Contractor Marketplace boasts a number of partner companies, each offering exclusive discounts on some of the products, services and equipment successful contracting companies use every day. That includes Service First Processing, who has partnered with EGIA to offer contractors a few helpful hints on chip cards -- tips that can help whether you're using Service First and EGIA or not.

Get the “Chip” off your shoulder and put it to work for your company . . . 5 important things to understand about accepting Chip Cards

EMV, which stands for Europay, MasterCard and Visa, is the fraud-reducing technology behind that tiny microchip that’s showing up on new credit and debit cards everywhere in the U.S.

This little chip has huge benefits when it comes to protecting against fraud for card-present transactions. Conversely, this little chip can expose your company to significant labiality if you are not processing credit card transactions correctly.

What is EMV?
EMV helps protect issuers, merchants and consumers against losses from the use of counterfeit and lost or stolen payment cards at the point-of-sale. It offers better data security than magnetic stripe transactions and makes counterfeiting a card next to impossible. EMV cards are embedded with a microprocessor that turns the card into a smart card and enables it to communicate secure EMV transaction data to an EMV terminal.

How does it work?
This chip technology adds layers of security against fraud and is virtually impossible to duplicate. At the moment of transaction- when the cardholder is most susceptible to fraud- an EMV cryptogram is what keeps sensitive data away from cyber-thieves.

How does this affect my company?
October 1, 2015 marked a major milestone where the fraud liability shifted to merchants for all point of sale devices. After October 2015, if a fraudulent transaction occurs, the liability belongs to whichever party has not yet adopted EMV chip technology. This means that the issuing bank or merchant could end up being financially responsible for the fraudulent transaction if they aren’t EMV-ready (except Automated Fuel Dispensers). Liability shifts for Automated Fuel Dispensers begins in 2017.

What kind of transactions are affected by EMV?
The transition toward EMV technology and the liability shift only affects card present transactions. Online and over the phone transactions, on the other hand, are not directly affected by EMV, in these cases, the liability remains subject to existing liability and chargeback rules.

How can I avoid liability from EMV changes?
1. Stay One Step Ahead of Card Issuers. Card issuers already plan to have chip cards in consumers’ hands by the end of 2015 and once consumers start using those cards, merchants with non-EMV-ready terminals will start taking on the liability.
2. Upgrade & Process Transactions Using an EMV Compatible Device. Having an EMV compatible terminal is just the foundation for EMV; merchants will actually need to process transactions using EMV whenever possible to truly avoid liability. As an EGIA Member you have access to the SFP processing program which provides a no cost EMV upgrade.

Below are three different scenarios to help clarify who retains liability on a given transaction:

Scenario 1
A traditional magnetic stripe card is swiped by the customer at a magnetic stripe terminal.
In this case, neither the issuing bank nor the merchant is EMV-ready. If the purchase is a fraudulent transaction, the merchant is generally not liable, just like today.

Scenario 2
A chip card is used at a traditional magnetic stripe only terminal.
In this case, the issuing bank is EMV-ready but the merchant is not. If the purchase is a fraudulent transaction, the merchant is generally liable, since the issuer has made the investment to upgrade to chip technology and the merchant has not.

Scenario 3
A chip card is used at a chip-enabled terminal.
In this case, the issuing bank and the merchant are both EMV-ready. If the purchase is a fraudulent transaction, the issuer will continue to bear the responsibility of the fraudulent activity, as they do currently.

For Questions about EMV or information about the Service First Processing – EGIA Member Program, Call 855-632-9862, www.sfprocessing.com/egia or visit the EGIA Contractor Marketplace.