If you live in the US, chances are you’ve probably gotten a new card in the mail recently by your credit card provider. While it can be a nuisance to switch your payments over to the new card, the move to EMV, or chip-and-pin, is an important one for security and fraud protection. But what you may not realize is that chip-and-pin technology has actually been around for several decades and is the de-facto standard across most of Europe. So why is the U.S. playing catchup?
Cost and Liability
The first major driving factor that caused the adoption of EMV technology to lag is the cost often associated with making the switch. If a merchant has to buy a new terminal; that cost may not be a small investment for them. This follows precipitously with consumers as well; if there are no EMV readers, there’s no demand to switch to the new cards. If there’s no demand to switch to the new cards, there’s no incentive for the merchant to switch, and so on.
The second reason for merchants not wanting to make the switch is the liability for fraud. When a fraudulent credit card transaction is completed and later refuted by the legitimate owner of the card, it triggers something called a chargeback. This is when the consumer gets their money back for a purchase that they never made. Typically, the responsibility would be on the bank, and NOT the merchant, to absorb the loss of the transaction. As a result of this; merchants were never on the hook if something happened with a transaction, so there was less of a concern about consumer protection knowing that they would never be responsible for what happened anyway. However; that all changed in the past year.
The Liability Switch
The United States is responsible for nearly half of the credit card fraud in the world, despite only processing about 25% of its payments. This, inevitably, became costly for the major credit card providers. So in October 2015 they had begun to put pressure on merchants to make the switch to EMV. They did this by abdicating responsibility for fraudulent transactions that took place on a traditional magnetic strip card. By doing this they acknowledge that the magnetic strip is far more susceptible to fraud, and EMV was the future for credit card transactions in the U.S.
This switch was crucial in the adoption of EMV technology, and the adoption rate exploded stateside. Now that the merchant was responsible for fraudulent transactions from a magnetic strip, they could no longer hide behind the protection of the bank taking the loss, driving up the demand for EMV adoption dramatically. This also sparked consumer demand, and the card providers were more than happy to follow suit.
The EMV switch is crucial in the battle against credit card fraud. Instead of a static, magnetic strip communicating with the terminal; the chip inside of an EMV card actually generates a unique, one-time code that’s accepted by the chip terminal. By moving to a dynamic code, the potential for the theft of the card number or data on the magnetic strip is drastically reduced.
The Swiftpay Difference
With Swiftpay; EMV technology is accepted as standard. All of our terminals process EMV-compatible cards at a lower cost than a majority of our competitors. Combine that with world-class customer service, chargeback protection and interchange plus processing, Swiftpay is your conduit to the future of payment processing. Get started with Swiftpay Systems today and protect yourself against fraudulent credit card transactions.