Decoding the EMV technology and liabilities

Magnetic stripe cards are getting outdated as the world is shifting to chip cards. Europay/ MasterCard/ Visa (EMV) technology has already established itself as an innovative system and global standard to combat fraudulent payments involving credit and debit cards. This new technology automatically entails questions regarding the system itself and conditions and liabilities involved in its use.

What is EMV?

EMV is a new international standard for credit and debit cards that are equipped with computer chips. It equally supports the technology to authenticate transactions and demarcate a fraudulent user from a genuine one. It has been developed in the wake of massive data breaches, counterfeit cards, and fraudulent online payment attacks. The EMV technology is being adopted at national level in view of protecting both consumers and businesses. It virtually makes fraudulent payments impossible.

How does EMV differ from the traditional cards?

Contrary to “traditional” credit and debit cards, EMV technology is supported by the use of a computer chip instead of a magnetic stripe. The latter contain unchanging data and whoever gets access to the data acquires information on the cardholder that can be used to make purchases. They are much targeted by counterfeiters who can make unlimited replicas as the information remains unchanged.

EMV card, on the other hand, contains a computer chip that generates a unique one-time code every time a transaction is made. As such, data stolen from a specific point of sale is useless as it may not be used again. EMV cards are proving to be very effective in the fight against fraudulent transactions and in securing payments. The United States has already witnessed a drop of 47% in counterfeit fraud in 2016 compared to 2015. On a parallel note, counterfeiters have shifted to focusing on card not present (CNP) transactions and fraudulent transactions implicating these cards shot up to 77% in the same period.

New set of liabilities

As from 1 October 2015, all the liability costs for cards stolen or cloned have moved from the financial institution where the card was issued to the least compliant party:

  • Credit card companies will be held liable only if criminals devise a way to exploit the EMV technology.
  • Banks not encouraging customers to shift to chip technology will be liable if the magnetic stripe cards used by the customers are counterfeited.
  • In case the customer’s bank has provided him with an EMV card and the merchant has failed to adopt the technology, he becomes financially liable for any fraud.

 Compliance with EMV technology

Implementing the EMV technology is still voluntary. As such, a business may choose not to adopt it. However, if a merchant does not have EMV readers and yet swipe a client’s EMV card, he will be fully responsible for any negligence or fraud and will have to reimburse the total loss sustained by the client. To go along with the new security trend, it is recommended that businesses invest in becoming EMV chip compliant. This includes acquiring updated hardware and software. It is also advisable that merchants making most transactions online equally update their card readers to safeguard themselves.  



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