Chip Cards and EMV Compliance - What It Means For Merchants
As you may be aware, certain changes are being implemented in the way debit and credit cards are processed. In the past, merchants have usually swiped the customer’s card through a magnetic stripe reader in order to get an approval on an transaction. In the future all of these transactions will need to be processed by way of a micro chip embedded in all bank cards. Credit and debit cards will need to be inserted into a “chip” slot on the handheld pin pad and the customer will need to enter a pin code. This system was devised by Europay, Mastercard and Visa (hence the acronym “EMV”) but the standards have also been adopted by Interac.
The goal of these new standards is to improve protection against possible fraudulent activity involving merchant and cardholder information. Studies have shown that countries which have adopted the new standards have dramatically reduced rates of debit and credit card fraud. The lengthy implementation timeline gives manufacturers, processors and support providers the time needed to migrate their large base of merchants towards meeting the EMV standards.
By October 2010 March 31st, 2011, all credit card transactions will need to be performed using CHIP systems. For some merchants, this will mean a software upgrade. For others, the pinpad and/or terminal will need to be replaced altogether. Merchants who currently process debit cards can process using the magnetic stripe reader for several more years without being in violation of these new standards.
The liability in a case of cardholder or merchant fraud will shift from the banks (TD, Royal Bank, etc...) to the acquirers / processors (companies such as Global Payments, Moneris Solutions, Paymentech, and so on). Up until now, banks have had to compensate for monetary losses in instances of fraud, but after this date the financial compensation will be paid by the acquirers. Merchants with hardware that does not meet EMV guidelines by this date will still be able to process credit cards, but some acquirers may attempt to pass along their financial risks to merchants in the form of increased fees for transactions processed on non-compliant hardware.
For general information on compliance standards and deadlines for Canada, please click the following link.
CHIP Information for Merchants PDF (right click to save as)
CHIP Compliance Timelines PDF (right click to save as)
If you are an existing POS Service Merchant
- If you are an existing POS Service merchant who had purchased your terminal prior to January 1st, 2008, your terminal is not EMV-compliant and you may have to eventually replace your terminal and/or pinpad with a newer model. Merchants who purchase new equipment before July 1st, 2010 will be granted new special rates and hardware pricing. If you process debit cards only, and have no intention of accepting credit cards in the future, then you do not need to update your hardware at this time.
- If you purchased your terminal sometime in 2008, your terminal may or may not be compliant and you will need to call POS Service for more information. If your hardware is not compliant, you must maintain your extended warranty with POS Service in order to be eligible for any upgrade (an upgrade fee may still be applicable).
- POS terminals purchased on or since January 1st, 2009 are already compliant with the upcoming standards.
For more information regarding EMV, please visit EMVCO.com
For more information about Interac, please visit Interac.org
