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July 15, 2015

EMV® Credit Card Chips: What’s On the Horizon and What You Need to Know Now

credit card chipsOver time, credit cards have undergone tremendous change, and even bigger changes are coming. For businesses with a lot of walk-in traffic, the way in which a physical card is swiped will be different. Using a new technology in the form of a credit card chip, payments will be easier and safer for consumers and merchants alike.

Improved Protection

One of the key benefits to credit card chips is the dramatic reduction of real data being stolen from magnetic strips located on the back of credit cards. Sophisticated criminals have the know-how and equipment needed to capture information and create exact replica credit cards that can then be used for fraudulent purchases.

In fact, these criminals can even duplicate bank logos, holograms, and magnet strips. To prevent companies from being ripped off and to protect consumers, the credit card chip technology consists of a magnetic chip embedded onto the front portion of the card. These credit cards will be designed with a number of additional safety features as well.

Ready for Use

Although numerous cards are still being tested, the technology itself has been proven and implemented by some credit card companies. For example, in almost all CIBC MasterCards and Visa Cards, EMV® chip technology is already implemented. For these cards, a set PIN is used in place of a signature when making purchases at any point-of-sale terminals that are chip enabled, as well as when taking out cash advances at banking machines.

Compared to credit cards with a traditional magnetic strip, some differences will be noticed when processing a transaction using a chip credit card. To complete a transaction, specific steps are followed:

  • The new technology card is inserted into the chip-enabled terminal.
  • The card remains inserted in the terminal throughout the entire transaction process.
  • Once the transaction is complete, the consumer will be prompted to remove the card from the terminal, followed by receiving a receipt for confirmation.

For CIBC credit cards, the company chose to feature the standard magnetic strip along with the new chip to ensure that MasterCards and Visas can be accepted anywhere until all merchants have switched over to the new technology.

The biggest challenge is that the issuance of new cards is costing banks upwards of $8 billion, not to mention the $25 million that merchants will need to invest for upgrading terminals. As a result, it is taking much longer to issue cards than anticipated. According to experts, just 23% of new technology credit cards will be replaced by the end of this year, meaning that most people will not receive them until 2016 or perhaps 2017.

However, to avoid fraud costs, all stores within the United States must have new machines installed by Oct. 1, 2015. At that time, a new Liability Shift Policy will be implemented by MasterCard, Visa, American Express, and Discover. As part of this, merchants that do not accept cards with the chip technology will be held completely responsible for any fraud against the business.

Looking into the Future

While there are different tools coming, one of the more practical is the “Verified By” MasterCard/Visa program. Designed to fight the problem of online fraud, any company that accepts payments online or payments through a mobile application will be able to implement the program whereby consumers are required to enter a unique password.

If credit card numbers are stored according to PCI compliance, once the login is complete, the consumer simply clicks on the “Verified” symbol that prompts the entry of a password. With that done, the transaction is complete. Using credit card chips in this manner ensures that a consumer making purchases for goods or services online is the real card owner. Along with the reduction of crime, this new technology has the potential to lower transaction fees.

To learn more about EMV® chip and credit card processing technology, call the Chosen Payments team at 1-855-4 CHOSEN today!

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