3 Things You Need to Know About the Upcoming EMV Technology Rollout

By October 2015, U.S. credit card networks and merchants will adopt EMV payment systems and point-of-sales technology. EMV chip technology, named after its creators — Europay, MasterCard and Visa — will replace the dated magnetic stripe technology currently on major credit and debit cards in favor of tiny computer chips.

With the deadline looming for merchants to update their card readers to be compatible with EMV payment technology, it’s critical for retailers and card providers to understand the implications of the change. After the deadline, retailers and banks that support magnetic stripe cards will be liable for any fraud losses that occur through the use of the cards, and will face serious damage to customer loyalty and sales if a security breach occurs.

Here are three important aspects of EMV technology that retailers must understand:

1. “Chip & signature” functionality: EMV payment technology is commonly referred to as “chip & pin.” However, most merchants and card providers don’t realize that this technology will likely not include PIN authentication in the U.S. On the contrary, EMV technology in the U.S. is expected to use signature authentication rather than PIN authentication, making “chip & signature” the more appropriate phrase.

2. Online security: While the use of computer chips in credit and debit cards is a huge step forward in terms of security for in-store purchases, the widespread U.S. rollout of EMV technology may actually increase online payment fraud. EMV technology in the U.S. doesn’t incorporate any meaningful improvements to online payment security. As a result, fraudsters are likely to shift their focus to targeting online shoppers, where the technology is still insecure.

This has been the trend in other countries that have adopted EMV technology. For example, in Europe, while in-store fraud has decreased dramatically after the implementation of EMV chips and in-store readers, online fraud actually increased 21 percent in 2012, in part due to the introduction of EMV chip cards.

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