Photo of credit card chips

10 Ways Merchants Can Prepare for the Coming EMV Chip Liability Shift

15 Sep 2015 by William Freed

In a recent Insight blog post, we explored the Europay, Mastercard and Visa (EMV) chip card “Liability Shift,” taking place Oct. 1, 2015. In short — merchants, rather than issuing banks, will be responsible for counterfeit card losses (aka card-present fraud) if they don’t have new, chip-ready Point-of-Sale (POS) terminals.

Counterfeit card fraud costs merchants more than $3 billion per year, according to industry research firm Aite Group, and it may grow to $3.6 billion by the end of 2015. Visa estimates card-present fraud accounts for about two-thirds of fraud in stores, and there’s a healthy black market for card numbers being used to buy goods that are easy for criminals to re-sell, such as electronics, gift cards and luxury goods.

What can retailers do to prepare for the liability shift? Here are 10 tips and best practices on preparing for chip implementation, from the retail experts at Insight:

  1. Get more information from your acquirer or card processor. They can help you better understand the process of what’s required to implement chip. This can encompass a needs analysis, learning about POS terminals and configurations, requirements for various card networks, as well as testing and certification of terminals and software, along with employee training.
  2. Build an internal implementation team. This group should be selected from the various areas in your business being affected by chip. Stakeholders from key departments, including IT, finance, marketing, training, communications, legal, and risk and compliance should work together to lead the rollout.
  3. Build your internal knowledge base and develop a plan. Your internal team will gain a lot of knowledge through research and existing practical experience, such that building an actionable plan for implementing chip should be a reasonably well-organized process. This is a great time to engage with a partner like Insight, who can bring consulting and systems integration experience to the table.
  4. Explore new solutions. The POS equipment market is brimming with new solutions that enable chip card transactions, as well as Near Field Communication (NFC) solutions like Apple Pay. Some of the coolest include Poynt, the new reader from Square, and workhorses from Verifone. Chip migration is a great opportunity to examine technologies that “wow” your customers.
  5. Implement a pilot and test it. Once new hardware has been selected, you’ll need to do a pilot implementation and test your systems, software and processing networks for completing transactions, as well as evaluate how chip will change the process at the checkout lanes.
  6. Train your employees. It is a good idea to train employees and internal stakeholders on new terminals and procedures in tandem with the testing phase. This should be done well in advance of the switch so that associates can guide customers.
  7. Leverage resources provided by industry partners. Issuing banks and the card networks offer numerous educational tools and retailer resources, such as POS decals, and videos and infographics that explain EMV, so it makes sense to use them.
  8. Roll out and continuously improve. Any launch, especially a big change to your POS environment, may encounter a few snags. When things go wrong, incorporating learnings into continuous improvement processes will be helpful.
  9. Train your customers. The consumer experience will change just a bit, and customers will need to complete a few transactions before being 100% comfortable with the new terminals. Fortunately, companies like Visa and Mastercard have already provided lots of resource material, and most EMV terminals prompt them through the process, too.
  10. Prepare for a potential spike in Card-Not-Present (CNP) fraud. Sadly, experts agree that after Oct. 1, fraud will migrate to the CNP realm, so retailers should be prepared for a coming wave of fraudulent online purchase attempts. Key precautions to take include being aware of purchases coming from unusual IP addresses, such as Eastern Europe or Asia, and/or big orders for fence-able goods. Make sure your intrusion detection, fraud analytics and firewall software are up to date, and also consider enforcing best practices for security, such as routine forced changes for passwords and two-factor authentication.

The good news is that the liability shift is an incentive, not a mandate, from top payment networks and issuers. Retailers who aren’t typical targets for counterfeit fraud — like a local dry cleaners or coffee bar — may choose to hold off until their terminal needs to be upgraded anyway. But with so many good, inexpensive choices in the market, implementing chip just makes sense, because merchants can protect themselves and their customers, while providing new ways to pay like NFC.

The best news with EMV chip is that fraud will go down over time — data from Visa shows that widespread use of chip has reduced fraud by more than 70%, just two years after adoption in countries that implemented the technology.

We’re excited about the new technologies in retail, and particularly so when it comes to keeping fraudsters on the run and giving them fewer places to hide. We’d love to hear your thoughts on this, and if you’d like to learn more about EMV chip card solutions and other retail offerings from Insight visit us online.