Q. The "EMV" chip card program date has arrived. How does this technology benefit consumers and business?
A. You are correct, the nationwide shift to chip cards is underway, and there are many benefits for the consumer and business. This is a huge shift in how businesses accept credit cards.
What is EMV? It stands for Europay, MasterCard and Visa - and is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. Approximately 120 million Americans already have received an EMV chip card, and that number is projected to reach nearly 600 million by the end of 2015, according to Smart Card Alliance.
The technology was adopted in Europe about 10 years ago, and the rest of the world has generally followed. In the United Kingdom, fraud related to the use of counterfeit cards has dropped to its lowest level since 1999, while the costs associated with this type of fraud in the U.S. has doubled in the past seven years.
As a result, U.S. card issuers are now migrating to this new technology in an effort to protect consumers and reduce the costs of fraud and its impact on identity theft. Today most credit cards have the chip technology on them. But most of these cards will be chip and signature cards, not chip and pin.
In the past, current standard-issue American credit cards store personal information in a magnetic strip on the back of the card. EMV cards, however, store information on a secure computer chip, which generates a one-time-use security code for every transaction, making counterfeiting virtually impossible.
The following are some benefits of the EMV cards:
* They are difficult to counterfeit. Counterfeit card fraud should drop. Online card fraud is expected to rise, however.
* They protect against point-of-sale breaches (similar to the 2013 RAM scraping breach aimed at Target).
The chip cards require PIN assistance to protect users when cards are stolen. The chip technology uses an encrypted two-factor authentication for each transaction.
For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems and complying with new liability rules. Starting Thursday, the liability for fraudulent transactions shifts from the bank to the merchant, if the merchant has not significantly deployed EMV terminals and processes.
Many small merchants are still not ready. If you are not sure if your business is ready, here is how to make sure:
Evaluate your current system. Every business is different, so it's important to speak with your credit card acquirer, processor, bank and other relevant parties to determine needs and cost. If you are using an older system, this may be a good time to consider upgrading to one which works with a smartphone or tablet.
Train your employees. The EMV cards work a little differently than the magnetic strips we're used to. Customers will have to insert the card into the terminal and keep it there until the transaction is complete.
Importantly to consumers and business, the shift to EMV should drive a dramatic reduction in card fraud.
Jim Winsett is president of the Better Business Bureau in Chattanooga.