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The EMV Liability Shift – What Is It and Why Is It Important

on Friday, 11 September 2015 in Health Law Alert: Erin E. Busch, Editor

Over the last few weeks, you may have received information from vendors or seen segments on the news regarding the adoption of the EMV standard by the payments industry. While many in the industry have a clear understanding of what EMV is and how it might impact business, for small merchants, including hospitals and clinics, the term just adds to the growing list of acronyms with which they must now be familiar. So what exactly is EMV and what do small merchants need to know about it?


1. What Is EMV?

EMV, an acronym for Europay, MasterCard and Visa, is a global standard for credit and debit cards based on chip card technology. This standard covers the processing of credit and debit card payments using a card that contains a microprocessor chip.

2. How Is This Different From The Current Practice?

EMV differs from current payment terminals that many retailers use, where a customer swipes the credit card through the device that reads cardholder data off the magnetic stripe. The chip technology found in EMV requires a cardholder to insert the card so that the chip can be read during the transaction. The chip provides dynamic authentication information that changes for each transaction, unlike the current magnetic stripe method with static data embedded in the magnetic stripe. Because the chip can hold much more information than a magnetic stripe can, EMV enabled cards support multiple methods of authentication.

3. Why The Change?

The main driver behind the EMV migration is card-related financial fraud. It is reported that almost half of the world’s credit card fraud happens in the United States where magnetic stripe technology is the standard. In 2014, the cost of card fraud in this country was estimated at $8.6 billion. That number is expected to rise to over $10 billion by the end of 2015.

4. Is This New Technology?

No. Most of the world, including Europe, has used chip cards for years. The United States is the last major market still using magnetic strip technology.

5. Why Is The October 1st Date Important?

On October 1, 2015, the “EMV liability shift” is scheduled to occur. This means that liability for card fraud, in certain situations, is being shifted from the issuer or processor to the merchant. Today, if an in-store transaction is conducted using a counterfeit, stolen, or otherwise compromised card, consumer losses from that transaction fall onto the issuing bank or payment processor (depending on the card’s terms and conditions). After October 1, the liability for card-presented fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction.

6. How Can This Impact Our Facility?

Consider the following scenario. A fraudulent card is presented for payment, and the merchant’s non-EMV-compliant terminal allows a counterfeit card to be used successfully. Because the merchant has not yet updated its terminal, the cost of the fraud will likely fall back on the merchant.

7. Will The Transition Be Complete By October 1st?

Not likely. Although the October 1 deadline is important because of the liability shift, most industry experts do not believe everyone will be in compliance by that date. Experts predict that roughly 70 percent of credit cards and 50 percent of debit cards will be EMV-compliant by the end of 2015.

8. What Should We Do If We Are Not Yet EMV Compliant?

Contact your merchant processor and talk to them about getting EMV-compliant point-of-sale terminals for your facility.

Grayson J. Derrick

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500

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