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Changes in the Credit Card Industry - What You Need to Know

The United States is far behind the rest of the world in transitioning to EMV (Europay, MasterCard and Visa) credit cards & readers. EMV cards became the standard in the European Union ten years ago, and they boast the lowest level of credit card fraud in the world. Conversely, Barclays reports the US accounted for 47.3 percent of worldwide payment card fraud losses, while producing only 23.5 percent of total volume. EMV cards offer much higher security protection from counterfeit, lost, or stolen cards due to the use of an embedded integrated circuit chip in the card.

The most commonly available EMV cards are “contact” smart cards, which require the cardholder to insert the card into an EMV terminal. Most EMV terminals are compatible with traditional magnetic stripe cards and with NFC (Near Field Communications) devices (i.e. mobile devices with non-contact radio communication payment capabilities), such as Apple Pay and Google Wallet.

The October 1, 2015 Liability Shift:
Today, if an in-store transaction is conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card's terms and conditions. After Oct. 1, 2015 (a deadline created by major U.S. credit card issuers MasterCard, Visa, Discover and American Express), the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction. Otherwise stated, if you are using a non-EMV terminal and your entity processes a counterfeit transaction from an EMV card, your entity will bear the liability for that transaction.

Actions:
Although EMV cards do not protect against all forms of fraud, now is the time to consider replacing credit card terminals with EMV compatible readers to avoid potential losses after the October shift in policy.

Evaluations and comments referenced herein are provided for loss control purposes only in conjunction with the AMRRP insurance program. They are not made for the purpose of complying with the requirements of any law, rule or regulation. We do not infer or imply in the making of these evaluations and comments that all material facts were reviewed or that all possible hazards were noted. The final responsibility for conducting safety, loss control and risk management programs must rest with the Member.

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