EMV chip card technology shifts fraud liability: October 1 deadline for merchants and card issuers.

• Author: Barbour, Tracy
• Position: FINANCIAL SERVICES

This month, businesses in Alaska and all across the country will experience a major shift in liability for point-of-sale credit card transactions. Effective October 1, business owners are responsible for fraud liability if they haven't switched their point-of-sale credit card terminals to the new EMV (EuroPay, MasterCard, and Visa) chip card technology.

However, automated fuel dispensers have until 2017 to convert to EMV technology.

Traditionally, credit card companies have been liable for credit and debit card fraud on card-present transactions. Now, either the card issuer or merchant who doesn't support EMV chip card technology will assume the liability.

EMV Card Security

The fraud liability shift is part of the nationwide migration to EMV technology, which is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. EMV cards have been used for about a decade overseas, and now payment networks MasterCard, Visa, Discover Card, and American Express are adopting EMV chip cards. The networks established the October 1 deadline for shifting fraud liability to encourage all payment processing parties to become EMV-compliant.

"The conversion to the EMV card, while not mandatory, is the right thing to do," says Mark Baumli, executive vice president for Wells Fargo Merchant Services. "After the transition, merchants are protected from counterfeit fraud. It's well worth the investment. They also can accept Apple Pay."

Traditional magnetic-stripe cards contain static data, which makes the card easier to duplicate. EMV cards are embedded with an encrypted computer chip that creates a unique code that changes with each transaction and cannot be used again. With EMV, if a hacker steals the chip information from a specific point of sale, the stolen information will not work for another transaction. "This will greatly reduce--if not eliminate--counterfeit fraud," Baumli says.

Facilitating Conversion

Alaska's financial institutions have been using a variety of tactics to help business owners prepare for the migration to EMV cards. Wells Fargo, for example, has undertaken a series of actions to build awareness, prepare small businesses for the EMV liability shift, and encourage business owners to adopt EMV chip-card technology, according to Baumli. "We have been providing EMV-capable equipment to customers since 2012," he says. "We also have had proactive outreach to let merchants know what...