If you have noticed that newly issued credit cards look different because of a small metallic chip on the front, there is a reason. According to EMVCo, the entity that oversees EMV technology and specifications, these small chips — called EMV microchips — hold payment data and provide codes specific to each purchase, adding another layer of security to transactions. While this technology is new to the United States, it is common around the world. In fact, the United States is the last major market to implement this technology.
While the U.S. government has not yet passed any laws addressing this new technology, several attorneys general have urged financial institutions to expedite the implementation of chip and PIN credit card technology, stating that this implementation is “imperative in order to provide stronger payment security and assurance to consumers.”
This new technology, however, has big repercussions. Effective October 1, 2015, certain major U.S. payment networks (Accel, American Express, China, UnionPay, Discover, MasterCard, NYCE Payments Network, SHAZAM Network, STAR Network and Visa) implemented a supposed liability shift for credit card fraud. If enforceable, the liability for fraud would shift to the party — either the card issuing financial institution or the merchant — that has not yet adopted EMV technology.
Despite this deadline, most merchants were not expected to be prepared by October 1st. With the average cost of EMV compliant equipment ranging from $500 to $1,000, many merchants have struggled to update their technology. One report stated that only 40 percent of retail locations are expected to be EMV compliant by the end of 2015. Regardless, merchants operating without EMV technology are at risk imposed by the EMV liability shift.
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