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What Small Businesses Should Know About EMV

Manasa Reddigari

The EMV payment standard is gaining widespread adoption worldwide. But what is EMV? Read on to learn about this payment standard and how EMV compliance can protect your business and your consumers.

What is EMV?

EMV is a global standard for debit and credit cards that uses chip technology. This safeguard aims to improve the security of traditional magnetic stripe cards. The acronym "EMV" stands for Europay, MasterCard and Visa. These are the three companies that created the standard.

How does EMV work?

Traditional debit and credit cards feature a magnetic stripe. Payment is processed when the card is swiped horizontally across a magnetic stripe reader. Chip-based cards, on the other hand, contain a built-in computer chip instead of a magnetic stripe.  When making a payment, the buyer pushes the card chip first into an EMV-enabled payment terminal. The transaction usually takes longer than a magnetic stripe card transaction. But, this small wait is well worth it for the increased security and buyer protections.  With every transaction, the chip in the card generates a unique code that cannot be reused again. This system makes EMV chip-based cards more secure than magnetic stripe cards, whose magnetic stripe can be copied by a fraudster to gain sensitive cardholder information.

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Why should small businesses care about EMV?

The EMV standard was put in place chiefly to combat fraud. Fraudulent transactions mean financial losses for both card issuers and small business owners.  A 2016 study found that debit and credit card fraud amounted to $21.84 billion in losses in 2015. Card issuers bore 72 percent of these losses, while merchants themselves incurred the other 28 percent. Recurring fraudulent transactions can impact your business' bottom line and ability to stay afloat.  Statistics like these led to an executive order to help reduce the risk of debit and credit card fraud by requiring payment issuers to embed cards with chip technology.  The other part of the initiative was for merchants to put in place the payment infrastructure needed to process the new cards. As of October 2015, businesses without EMV-enabled payment terminals could be forced to foot the bill for losses from transactions made with compromised cards.  This means that if your business currently processes cards from a non-EMV-enabled payment terminal, it's in your best interest to switch to an EMV-enabled terminal if you can afford it to protect your business and your consumers' financial data from fraudsters.

What is EMV compliance and how do you obtain it?

To make your payment infrastructure EMV compliant, you would need to upgrade any point-of-sale systems at your business to accept chip-based cards. This includes countertop and mobile payment terminals. The easiest way to do this is to invest in an EMV-enabled payment terminal. These terminals are available from Square, Stripe, Verifone, Ingenico and other providers.  The advantage of EMV-enabled terminals is that they can also process traditional cards with magnetic stripes. This means that even if your customers are still in the transition from magnetic stripe cards to chip-based cards, they can always use your EMV-compatible terminal to make payments.

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