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Microchip credit card technology is coming — are you ready?

Credit cards containing microchips are already the standard in Europe and Canada. Now, the U.S. is poised to catch up by implementing this newer, more secure technology. The technology is known as EMV for its developers Europay, MasterCard® and Visa®. EMV cards come equipped with a microchip that creates dynamic data unique to each transaction, making the card much harder to replicate than magnetic stripe technology.

Why the change?

As evidenced by major cases of fraud during the last holiday season at both Target and Neiman Marcus, and more recently with Home Depot, security surrounding card transactions was lacking in the U.S. Major credit companies had already announced a change in rules about fraud liability slated to take effect in October 2015. The new rules make EMV cards all but mandatory. The rules state that the bank or merchant could be held accountable for any fraudulent charges if one of them has not upgraded to the new system — the party with the weaker security measures must pay. This will mean replacing current cards with the new technology, as well as installing new card readers at major retailers. Now is the time for your business to make plans for the switch.

Next steps for your business

  • Understand the importance of compliance. Most credit card issuers will initially issue cards with both EMV and magnetic stripes. So, your current equipment will still work. The October 2015 liability shift requires microchip-enabled cards, although banks can still choose to require a PIN or use a signature when making transactions. Failing to accept EMV payments could put your company at greater risk of being held liable for fraudulent use. Is that a risk you can afford to take?
  • Start researching your equipment options. Think about other technological upgrades that could help your business. If you will be purchasing new equipment, now is a great time to start replacing outdated systems with EMV ready equipment.
  • Educate your staff. Be sure they know that your business must accept both microchip cards as well as magnetic stripe-only cards beginning October 1, 2015. Ensure your staff knows to use the EMV system unless the card is magnetic stripe-only.
  • Train on use of any new equipment. Remind your staff that customers using chip and PIN cards must enter their PINs themselves. Employees should never ask for a customer’s PIN or enter it for them.
  • Establish guidelines for forgetful customers. There will likely be an adjustment period for many customers while they get used to needing a PIN for transactions. Have your staff remind customers that the PIN may be the same one they use for withdrawing cash from an ATM, and the customer can contact their card issuer for help if they forget their PIN.

Find out more

If you’d like to know more about EMV technology, here are some helpful resources:

VISA U.S. Merchant EMV Chip Acceptance Readiness Guide

MasterCard EMV — The Future of Payments With MasterCard

Another great resource is your California Bank & Trust Business Banker who is always ready to answer your questions about business needs at (800) 355-0507.

 
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The information contained herein may not represent the views and opinions of California Bank & Trust, a division of ZB, N.A. or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal or business advice.
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