As small business owners, you strive to provide high-quality customer service. Part of providing this experience is making sure that frequenting your business is hassle-free. But credit card fraud is upsetting for both you and your customer. Working to reduce fraudulent transactions and friendly fraud chargebacks can protect your business and your clients.
Over the years, businesses have worked to increase their security measures. Credit card companies, in particular, have worked to address different forms of fraud. One way they did this was by introducing EMV-compliant cards and devices.
So, what exactly is EMV compliance, how does it impact you and how can you make sure your credit card processing equipment is up to standard? Read on to learn more.
What is EMV Compliance?
EMV compliance is a standard set to increase the security of a point of sale (POS) system by requiring that said system accepts chip credit cards. EMV stands for Europay, Mastercard and Visa. These three major credit card companies are the pioneers behind the transition to EMV-compliant devices.
Before, credit cards only used magnetic strips. Soon, these strips became a liability. Because the data stored on the magnetic strip does not change, it's easy for thieves to copy and steal credit card information and make fraudulent transactions.
Then, EMV chip cards were introduced. The chip works differently than a magnetic strip because it creates a unique token for each transaction, making it more secure and difficult for potential thieves to copy information. Of course, it’s not infallible, and fraud may occur. However, if the transaction token is duplicated, this is a strong indicator of a counterfeit transaction.
Visa reported merchants with EMV-compliant devices that accepted chip cards saw counterfeit fraud drop by 80% from September 2015 to September 2018.
The switch to chip readers not only impacts the way transactions are processed, but it also created a liability shift for fraudulent transactions.
How Does EMV Compliance Affect My Business?
If you do not have an EMV-compliant credit card reader, you assume all liability in any case of credit card fraud. Because chip cards are much safer than magnetic strip cards, credit card companies are unwilling to assume liability for fraudulent transactions if you, as a business owner, have not upgraded your POS system.
While it’s technically not illegal to have non-EMV-compliant devices, the deadline for businesses to upgrade without being penalized with fraudulent transaction charges passed on October 1, 2015. Gas stations were exempt from this deadline.
Before the switch to EMV-compliant devices, the credit card company would assume responsibility for the charge of the sale, the cost of any goods and any associated chargeback fees in any cases of counterfeit fraud.
Now, if you have not upgraded to an EMV-compliant device and there is a report of fraud, you assume responsibility for charges associated with credit card fraud. If you've upgraded to an EMV-compliant POS system and there is a fraudulent charge, the credit card company can still be held liable for any associated costs.
Often, businesses hesitate to upgrade their equipment because of the associated costs. However, by foregoing an upgrade, you run the risk of losing exponential amounts of money. On average, it can cost between $500–$1,000 to upgrade to an EMV-compliant credit card reader. This cost is much lower than what could potentially be thousands in credit card fraud fees.
What About “Card Not Present” Fraud?
EMV compliance is only applicable for “card present” fraud. “Card present” transactions mean a customer’s physical card is dipped in your EMV-compliant reader. The EMV-compliant liability shift impacts these types of purchases.
However, online transactions are considered “card not present” transactions. And while there is no liability shift for digital purchases, the chance of fraud increases when a thief can input any card number without extra verification. To avoid a chargeback headache and combat this type of fraud, it’s best to implement security measures.
You can combat “card not present” fraud by asking customers to provide their address, CVV number or both. When an address is input, you can use an address verification service (AVS) that cross-references the input address with the address on file with the issuing card’s bank. If the addresses do not match, the transaction can be denied. While this isn’t a fool-proof way to prevent fraud, if a chargeback is filed, the merchant has a stronger case with a full match AVS result.
A CVV number is the three- or four-digit code on the back of a credit or debit card. Asking a client to enter this code helps prevent fraud since it’s likely a thief only has part of someone’s card information, not all of it. By instituting these extra security measures on “card not present” transactions, you lower the chance of fraud and increase your protection from being held liable for chargeback costs.
How Do I Upgrade to Be EMV Compliant?
Upgrading your POS equipment to support EMV chip cards can seem like a steep cost upfront. However, you’ll save yourself a potential financial headache down the road if you decide to upgrade as soon as possible. Typically, you'll need to call your payment processing company and POS equipment provider to make the switch. Make sure any new equipment accepts chip cards and upgrade your software to meet EMV-compliant standards.
But if you switch to Vagaro, you get a FREE contactless credit card reader when you sign up, which is 100% EMV-compliant. Already a Vagaro subscriber? You can still claim your free credit card reader with a one-year contract when you apply for credit card processing.
Credit card processing unlocks so many business opportunities like the ability to take deposits, sell from your online store and take contactless payments. Vagaro is committed to helping your business take payments securely & effortlessly. With credit card processing, it’s easy to do just that. Upgrade to the best all-in-one software solution when you sign up for Vagaro.