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More chip cards coming to consumers, but merchant readiness is mixed
Banks are ramping up efforts to get more secure chip-embedded credit and
debit cards into customers wallets, while merchants face a financial
deadline for adopting the new technology.
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.
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.
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What is the Pivotal One program for merchants?
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.
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What is the Pivotal One program for merchants?
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