The Basics of EMV
EMV stands for Europay, Mastercard, and Visa; the new chip technology contained in credit and debit cards. It is meant to provide greater security for consumers to protect them against fraud.
The chip has embedded microprocessors to ensure stronger transaction security features.
What’s The Difference between an EMV card versus the Magnetic Stripe Cards
The most significant difference between an EMV and a magnetic stripe card is that magnetic stripe cards have static data; the data does not change. This is problematic because it can easily be duplicated many times. This is why there is an epidemic in the United States with companies experiencing breaching of consumer card information. Do you remember the Target credit card breach scandal?
On the other hand, EMV has dynamic data. Every transaction produces a unique transaction code which cannot be used again.
But, although EMV does create a different code for every transaction, it still does not prevent criminals from stealing data completely. What it really does is make it more difficult for criminals to gain access to personal credit card information.
The identity theft epidemic in the U.S. has increased over the years, largely due to the fact that other countries have adopted the use of EMV cards, leaving the U.S. vulnerable and the only target left for criminals looking to breach credit card information. This is why companies like VISA are urging many merchants in the U.S. to make the transition for the sake of the consumer.
How is an EMV enabled Credit or Debit Card Processed
With EMV credit and debit cards, users no longer need to swipe but rather insert their card in the direction of the chip, into a chip-enabled terminal for processing. This process is much slower than the magnetic stripe process as the data flows between the card chip and the issuing financial institution to verify and create the transaction code.
The speed of processing also depends on the processing speed of the merchant’s machine.
So, why is Walmart suing VISA?
Walmart, like other merchants, are concerned about the increased number of chargebacks. In addition, many also feel that they really did not receive adequate notice about the transition from magnetic stripe to EMV/chip enabled cards, on top of the added chargebacks.
Payment networks like VISA, have countered by saying that merchants have known about the transition for at least 5 years. VISA has urged merchants to switch because many are still being targeted by criminals due to not properly configuring their network, having poor password protection, and insufficient remote access security.
But, is the fight about the security of consumer’s information or is it more about costs?
Many speculate that Walmart’s motives for suing VISA have less to do with consumers and more to do with money. Many retailers like Walmart are finding the transition to be very expensive as they are having to update their current systems.
What are the implications of not transitioning from magnetic stripe to chip credit and debit cards?
Visa Liability Rules:
- A traditional magnetic stripe card is swiped by the customer at a magnetic stripe terminal.
- If the purchase is a counterfeit transaction, the merchant is generally not liable.
- A chip card is used at a traditional magnetic stripe-only terminal.
- If the purchase is a counterfeit transaction, the merchant holds liability.
- A chip card is used at a chip-enabled terminal that has been activated by the merchant.
- If the purchase is a counterfeit transaction, the merchant is not liable, and the issuer will continue to bear the responsibility of counterfeit fraudulent activity.
- The liability for automated fuel dispensers and ATM transactions shifts in October 2017.