High-profile breaches of customer data at major retailers like Target
and Home Depot over the past couple of years mean that in 2015, you’re
more likely to find something new in your wallet: a credit or debit card
with a computer chip embedded in it.
That microprocessor is the key to a system intended to provide
increased security for customers, merchants, banks and credit card
companies against fraud from counterfeited cards. The technology is
called EMV (it gets its name from credit card companies Europay,
MasterCard and Visa). It has been the standard for payment plastic in
Europe and Asia for years, and it’s becoming prevalent in Canada and
Latin America. According to
EMVCo
LLC, which oversees the development of worldwide EMV card standards,
there are almost 2.4 billion EMV cards in circulation worldwide, and
almost 37 million EMV-capable card terminals.
But in the U.S., issuance of EMV cards --also called chip cards or smart cards — has been minimal by
comparison. Up until the past couple of years, most of the chip cards
issued here were corporate cards or for customers who travel overseas.
By the end of 2013, only about 10 million chip cards were issued in the
U.S., out of about 1.2 billion total cards in American circulation. And
while almost every store and restaurant can take magnetic-stripe cards,
there were only about 2 million EMV-capable terminals that can
communicate with the new cards.
That will change dramatically this year.
Throughout 2015, banks from huge multinationals to small community
institutions are ramping up their efforts to get new chip cards into the
hands of their customers. Most are replacing old magnetic-stripe cards
as they expire with new chip cards (which will still have a magnetic
stripe for older card readers). The EMV Migration Forum, which is
steering U.S. adoption of the new technology, estimates that by the end
of this year, the number of chip cards issued in the U.S. will grow to
about 600 million, or about half of
the cards in circulation.
It’s also an important year for merchants who accept credit and debit
cards. From retail giants to fast-food places to mom-and-pop merchants,
businesses face a looming October deadline (set by the major card
companies) for what the payment industry calls a liability shift for
counterfeit card transactions. That means that unless a merchant has
installed and activated card readers capable of processing a chip-card
transaction, the merchant — instead of the bank — shoulders the
financial loss on any sales made on a counterfeited chip card on a
magnetic-stripe-only reader.
That’s because the computer chip not only stores the customer’s
payment information, but it also generates a special one-time-only code
for each transaction, making it almost useless to try to counterfeit the
chip. By contrast, the magnetic stripe on the back of the card can
still be easily counterfeited, and older card readers can’t tell if the
card is authentic or a fake.
The EMV Migration Forum anticipates that by the end of this year, the
number of EMV chip-enabled terminals in the U.S. will reach about 7 million.
Jim Ford, president of Fresno-based Central Valley Community Bank,
described the EMV process as an encrypted “handshake” of recognition
between the chip embedded in the card and the merchant’s card reader,
and then between the card reader and the credit-card payment processor.
“It’s a good and important step for banks and processors to get done on
behalf of consumers,” Ford said.
**************
What is the Pivotal One program for merchants?
