October 1 marks the beginning of the end of the swipe-and-sign credit card transaction. While shoppers and merchants will still be able to pay with and accept magnetic-stripe cards after October 1, today’s the deadline for EMV compliance.
EMV cards (short for Europay, MasterCard, Visa) are the new standard for how we pay and get paid with credit and debit cards. Also known as chip-and-PIN cards, EMV cards feature an embedded microchip on the front that makes them harder to replicate than magnetic-stripe cards.
When a shopper dips her chip card and enters her PIN number, the transaction is less vulnerable (but not invulnerable) to fraud.
The problem is most consumers still don’t have the new cards and many retailers and restaurants don’t have the necessary equipment to accept them. This is especially an issue for mom-and-pop establishments and other small businesses.
Estimates on merchant readiness range from as low as 40% to as high as 50%-75%, with larger retailers leading the pack, according to the National Retail Federation. Major retailers already processing chip-card transactions include Wal-Mart Stores, Target, and Home Depot.
USA Today reports that more than six in 10 American cardholders still don’t have chip-enabled credit cards.
That brings us to what’s known as the “liability shift.” While migration to the more secure EMV cards is voluntary, as of October 1, retailers that accept chip cards but haven’t upgraded to EMV-compliant readers may be liable for certain types of fraud.
Under the old system, the card issuer is liable. Card issuers will still be liable for counterfeit-card fraud if a magnetic-stripe card is used with a magnetic-stripe terminal, a magnetic-stripe card is used with a chip terminal, or if a chip card is used with a chip terminal.
Today marks the beginning of what will be a multiyear migration to the new payment technology. Indeed, gas stations have until October 2017 to upgrade to EMV-compliant pay-at-the-pump technology.
Alexandra Biesada shops every day, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.