(Source: “What is EVM?,” Square Blog, 30 July 2014)
U.S. banks are switching up the insides of your customers’ credit cards. They’re adding something called EMV technology, which stands for “Europay, MasterCard, and Visa.” Translation: Credit cards will be equipped with a super-small computer chip that’s extremely hard to counterfeit. If you’ve gotten a card recently, chances are it’s souped up with this technology.
Why the changeover? Here’s a crazy statistic: Almost half of the world’s credit card fraud now happens in the United States—even though only a quarter of all credit card transactions happen here. The banks want to rein this in ASAP by moving away from magnetic-stripe cards, which are much easier to counterfeit. The recent Target and Neiman Marcus security breaches also added motivation.
So how exactly will this affect your business? For starters, you’ll need a new processing device to read the information in the chip cards. This can get expensive. And come October 2015, businesses that don’t have an EMV processing device could be on the hook for fraudulent chip card transactions.
As you might imagine, chip cards are a pretty hot topic in the financial press right now. There’s a lot of information to sift through. And because any EMV card discussion usually mentions “fraud” and “liability,” it’s natural that it could put small business owners on edge.
We’re here to give you all the essential information about how the upcoming changes will affect you. We’ll be starting a regular newsletter to keep you in the know, which you can sign up for here.
You probably already have questions about all of this. So to kick off our EMV article series, we thought we’d go through the nuts and bolts. We’ll also explain exactly how Square can help.
Will migrating my business to EMV cost me an arm and a leg?
Here’s where Square comes in. We’re building an EMV-compliant reader that’s incredibly affordable and easy to use. We’re also working on several solutions for our Square Stand customers. You can sign up here to be notified when our EMV-enabled chip card readers are ready.
What’s the deal with this “liability shift”?
Here’s the lowdown: Currently, if you run a fraudulent card, banks absorb the costs. Starting in October 2015, if someone pays with a fraudulent chip card, and you’re not set up with an EMV card reader, the banks will no longer be liable. So say, for example, a fraudster buys $30 worth of hot sauce from a restaurant with a counterfeit EMV chip card. If the restaurant doesn’t have a chip card reader to process the transaction, it could be on the hook for the $30.
Is this completely new technology?
Nope. Most of the world, including Europe, has been using chip cards for years. The United States is actually the last major market still using magnetic-stripe-only cards.
Will chip cards be swiped the same way as magnetic-stripe cards?
It’s a totally new dance we call the “chip-and-dip.” Chip cards are inserted, or “dipped,” into the payment device and left in place for the entire transaction as the reader and card talk back and forth. That’s when the magic happens. Square’s new chip card reader will be able to process both chip and magnetic stripe cards.
Will Square still offer the current Square Reader after October 2015?
You’ll still be able to get our current reader while the nationwide transition to EMV technology is underway. Based on chip card rollouts in other countries, we estimate it’ll take roughly three to five years for mass adoption. (Old habits die hard.) But getting an EMV-enabled device is a good thing to start considering. The sooner you’re set up, the sooner your business will be better protected.