Credit Card Liability Shift

You may have heard that on October 1, major U.S. credit card issuers caught up with other world economies and transitioned to full adoption of EMV chip-enabled cards to reduce credit card fraud. This change is big for small business owners, as described recently by the Small Business Administration in it recent post “Migration to EMV Chip Technology and Your Small Business”. @SBAgov

What is EMV?

EMV stands for Europay, MasterCard and Visa, currently used in more than 80 countries around the world. EMV-compliant cards have an embedded chip, offering increased security to reduce fraud. The chips make the cards much harder to counterfeit or copy by making each transaction unique. EMV is now the standard for point-of-sale terminals and automated teller machines.

What EMV Means for Small Business

For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems. It also means a change in liability for credit card fraud. Before October 1, 2015, if an in-store transaction was conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction generally fall back on the payment processor or issuing bank.

Effective October 1, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in certain fraudulent transactions. Small businesses and non-profits are most likely to be the least EMV-compliant part in any transaction. In plain English, that means small business could end up liable for consumer losses from credit card fraud. That can get expensive.

What You Should Do

Businesses and non-profits with point-of-sale systems should contact their payment services provider or financial institution to obtain a new EMV-compliant integrated circuit (IC) card reader. Most providers have already communicated this change to customers. But the responsibility to order (and pay for) the new reader still falls on the small business.

Other reviews and controls can help to control your business and non-profit credit card risk. Getting an EMV-compliant card reader is a great way to get started.