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EMV: Changing the Way We Do Business

June 18, 2014

The credit card world will soon be undergoing a big transformation in the United States. On October 1, 2015, all merchants accepting credit cards will be required to use point-of-sale terminals that are capable of processing EMV (or chip) technology.

Already, chip cards are being implemented in the United States, and the looming change will require time and energy in order for merchants to comply with the latest regulations. Understanding the change and putting a transition plan in place are great first steps to make sure your company is prepared.

What is EMV?

EMV – or Europay, Mastercard, and Visa – is already prevalent in Europe, Canada, and other high-commerce locations. While the credit cards we’re familiar with in the United States use a magnetic stripe to complete a transaction, EMV cards employ a built-in security chip that uses a form of cryptography to authenticate the card, the card issuer, and the data stored on the card. These processes make EMV a much more secure platform.

Why is the transition occurring?

Across the globe, EMV is the standard for credit and debit cards. While magnetic stripes are prevalent in the United States, many providers and banks are beginning to offer EMV cards in America. However, the vast majority of U.S. merchants’ point-of-sale terminals are not yet equipped to handle this growing trend. The regulation that goes into effect in October 2015 will ensure all terminals can accept payments with magnetic or EMV cards.

For many reasons, this change is beneficial. From a security standpoint, the level of interaction between the payment terminal and the EMV card provides a higher degree of certainty that the transaction is not fraudulent. Further, it is much more difficult to counterfeit EMV cards.

Not only does this protect consumers, but it also protects businesses. In the United Kingdom alone, counterfeit fraud losses due to credit cards dropped by more than 60% in the past 10 years since the adoption of EMV technology. For the consumer, this means fewer disputed charges, and for the merchant, this means a decrease in chargebacks and lost revenue.

In addition, this upgrade will foster innovation beyond EMV acceptance. The new point-of-sale terminals will integrate contactless payment – a technology that enables clients to pay by tapping their cards or waving their phones. This technology speeds up checkouts through a secure transaction and supports the continued move that consumers and businesses are making towards mobile transactions.

There are considerations for your business to make sure that contactless payments is something you want to enact now, but regardless of whether you accept this feature immediately or in the future, your company’s point-of-sale terminals would already be set up for this technology.

How should I prepare for this change?

While consumers are constantly bombarded with information about changing regulations and technologies, businesses are often left on their own to make sure their companies are adequately prepared for new regulations and opportunities. It’s important for your business to partner with a bank that will ensure your company is ahead of regulatory concerns and updated with the latest technology, tailored to your needs. Developing an action plan with your banking partner is a key first step to being prepared.

If you would like to discuss your current banking platform, we are always available to provide a complimentary benchmarking review to assess your collections and disbursement methods as well as ensure that you are in compliance with the latest regulatory changes, such as the EMV update. If you would like to set up a benchmarking review or discuss your timeline for EMV compliance, please contact Marie Nguyen at 303.531.8100 or marie.nguyen@myfw.com with any questions or inquiries.

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