Oct 22, 201510:35 AMOpen Mic
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What’s the story behind your new EMV cards?
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Even if you are among the more than 120 million Americans who already have received new credit or debit cards with embedded microchips, you might not know the full story behind the switch to the more secure technology. Effective Oct. 1, new rules shift liability for fraudulent transactions to card issuers or retailers who have not upgraded to microchip technology.
But you probably do not know the main reason why card issuers are making the change: widespread fraud. Although the U.S. accounts for about 25% of all credit card transactions, roughly half of all credit card fraud occurs here. The security features on the new chip cards will make it more difficult for fraud to occur.
In addition to adopting the chip technology, which has been in place in Europe and other locations worldwide for years, banks and other card issuers have new liability rules in place as of Oct. 1. The chip technology will not prevent all fraud but it’s expected to reduce losses significantly. Often referred to as the EMV shift — for Europay, MasterCard, and Visa, the companies that established the security standard — the new rules determine who will pay if fraud does occur.
Previously, if a face-to-face card present fraudulent transaction occurred, the card issuer usually was liable. With the EMV shift, liability will fall to the party that is least compliant with the new rules. That is the motivation for banks and other card issuers to switch to the new chip cards. But the new rules also affect retailers and other vendors, who now could be liable for losses incurred in credit card fraud if they don’t offer chip enabled card readers.
For example, if a purchase were made with a stolen or counterfeit chip card from a merchant that has not updated its system to accept the new technology, the merchant would be responsible for the loss. In the past the card issuer was liable.