As of October 1, 2015, merchants who do not use a chip card reader to process transactions when a chip card is presented, can be held liable for any fraud that occurs as a result. This liability shift is significant and EMV is a tremendous weapon in the fight against card-present counterfeit fraud. The following reasons highlight why you should issue EMV chip cards to your cardholders as soon as possible.
1. EMV chip cards are more secure than magnetic stripe cards
While the two types of cards may look the same, the way that the data is accessed to process a payment transaction is very different. Traditional magstripe cards are swiped through a magstripe reader, or payment card terminal in order to perform a transaction. Chip cards can be swiped too, but have extra security advantages when processed via EMV chip readers. EMV technology increases card data security mainly by making it difficult to create counterfeit cards, and by requiring cardholder authentication verifying that the card belongs to the person using it. The UK Cards Association reports that losses at U.K. retailers have dropped by 67 percent since 2004 when EMV was introduced, and lost and stolen card fraud fell by 58 percent between 2004 and 2009.1
- EMV chip cards help protect your credit union from fraud liability
Before the October 1, 2015, liability shift, if an in-store transaction was conducted using a counterfeit, lost, stolen or otherwise compromised card, consumer losses from that transaction fell to the payment processor or issuing bank, depending on the card’s terms and conditions. Now, card-present fraud liability has shifted to whoever is the least EMV-compliant party in a fraudulent transaction – and that could be your credit union. For example, if your financial institution issues a non-chip card that is used fraudulently at a merchant that accepts chip technology, the cost of the fraud will fall on you since the merchant was unable to process via EMV. Also consider that half of all U.S. retail establishments will be EMV-ready by the end of 2017. This will rise to 85 percent by the end of 2019.
- Issuing EMV chip cards can help drive member loyalty
Consumers are increasingly aware of – and concerned about– the threat of fraud, thanks in part to several high-profile card data breaches. Cardholders want to know what is being done to help prevent fraud with their payment cards. By issuing EMV chip cards to your members, you assure them that you are providing the latest technology to combat card-present fraud. Cardholders are more likely to remain loyal to your credit union when they believe you are looking out for their best interests.
- Issuing EMV chip cards can help you stay competitive
Some of the largest U.S. financial institutions have already moved most of their card portfolio over to chip cards. From a competitive perspective, moving toward an EMV migration gives your members peace of mind, keeps attrition down and helps attract new members.
- EMV cards present an opportunity to deepen your member relationships
You can expand your reissue strategy to include targeted marketing campaigns that encourage increased spending and member retention. Card Payments can help you create and execute cardholder campaigns designed to increase transactions and change purchasing behaviors.
1 New Card and Banking Fraud Figures, UK Cards Association, March 2010.