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Fraud

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Chip Card Information for Merchants
Changes are coming

Debit and credit chip cards are coming, and merchants will be seeing a lot of them. Soon.

There is a good reason for this change: These smart cards with a built-in computer chip give cardholders and merchants an added layer of security against point-of-sale fraud.

The embedded chip makes transactions safer because it contains account data and issues a unique, one-time code each time it is used. That fights counterfeiting and card-present fraud that costs businesses and financial institutions billions of dollars a year.

But for this heightened security to work, businesses need to install chip-enabled terminals that interact with a cardholder's chip card to send the encrypted data across the payment network for verification and authorization.

Here's how the chip card point-of-sale process works

  1. Cardholders insert their card, face up and chip end into the chip-enabled device.
  2. They leave the card in the device during the entire transaction.
  3. Instructions on the screen guide them through the transaction and they either sign their name or enter a PIN as needed. They remove their card and take their receipt when the transaction is complete.

The magnetic stripe hasn't gone away

Chip cards will still have a magnetic stripe on the back for a while, which means they will continue to work in 'swipe' terminals, but the payments industry is strongly encouraging merchants to switch to chip-enabled terminals.

Purchases online and by phone haven't changed

Chip cards don't change the online or over-the-phone payment process. Consumers will provide card information as they have done in the past.

Frequently Asked Questions

What are chip cards?

What should merchants be thinking about?

Is there an important chip card date for merchants?

Are merchants required to switch to chip-enabled terminals?

What if a merchant is using a chip-enabled device but a card contains no chip?

Is there a reason this is happening?

Are there other reasons merchants should have chip-enabled terminals?

Are there costs involved?

Will making payments at a chip-enabled terminal take longer?

What is the difference between chip and signature and chip and PIN?

Will chip cards prevent data breaches?

What are chip cards?

A chip card - also called a smart card or an EMV card - is a credit or debit card that contains a microchip that enhances the security of cards during point-of-sale transactions. These cards, already in use in much of the world, use the security standard originally developed by Europay, MasterCard and Visa (EMV) to fight card fraud resulting from theft, skimming and counterfeiting.

What should merchants be thinking about?

Briefly, here is a list of considerations: 

  • The Oct. 1, 2015, liability shift could be costly for merchants who aren't using chip-enabled devices for transactions.
  • The conversion to chip-enabled devices will require time for planning, testing and employee training.
  • There are likely to be some expenses involved, based on your business needs.
  • This can protect you from costly point-of-sale fraud.
  • More and more, consumers are expecting merchants to provide a secure transaction process.

Is there an important chip card date for merchants?

Yes, there is an important fraud liability shift on Oct. 1, 2015. After that date, merchants who have installed chip-enabled terminals that interact with chip cards are protected from financial liability for card-present fraud losses resulting from certain types of card fraud, including counterfeit fraud.

Are merchants required to switch to chip-enabled terminals?

No, it's not a requirement but it could be costly if they don't. That's because of the liability shift. If the merchant hasn't converted its payment devices to chip-enabled technology by October the merchant could be held liable for the costs of a fraudulent transaction if the person paying at the terminal has a chip card but has to swipe the magnetic stripe on the back of the card through an older terminal.

What if a merchant is using a chip-enabled device but a card contains no chip?

Chip cards will still have a magnetic stripe on the back, allowing cardholders to 'swipe' the card to complete a transaction. However, in this instance the card issuer would be liable for the cost in the case of a fraudulent transaction because the card doesn't contain a chip but the merchant device was capable of processing a chip transaction.

Is there a reason this is happening?

The goal in the U.S. is that all debit and credit cards will be issued with chips and that all merchants will convert to chip-enabled devices. While the full process will likely take a few years, this combination is expected to significantly reduce card fraud at point-of-sale transactions, which has been the case in other countries that have already converted to chip cards. Chip cards already are in use in most of the rest of the world.

Are there other reasons merchants should have chip-enabled terminals?

Customers have become increasingly concerned about the security of card payments as they hear more about data breaches and the potential for credit and debit card fraud. In countries where chip cards and chip-enabled terminals have been in use, the incidence of card-present fraud has fallen. Knowing that their transactions and account information are more secure is reassuring to cardholders. The prospect of reducing the costs of card-related fraud should also be an incentive to merchants.

Are there costs involved?

There are costs involved in upgrading to chip-enabled devices, but those costs could be offset by reductions in fraud-related expenses. Merchants should contact FCB Banks to get details about device options, costs and other requirements for making the conversion.  

Will making payments at a chip-enabled terminal take longer?

Yes, the payment process will take a bit longer. Rather than swiping their debit or credit card, cardholders will insert the chip card into the card-enabled terminal and leave it there during the full transaction. That allows communication between the card, the terminal and the payment networks to verify the card and authorize the transaction.  

What is the difference between chip and signature and chip and PIN?

Depending on the card and the transaction, cardholders may be asked to provide either a signature or a PIN to complete a transaction. Some transactions could be completed without either a signature or a PIN.

Will chip cards prevent data breaches?

While chip cards won't prevent the types of data breaches that have hit some merchants, they do make it extremely difficult and costly to produce counterfeit cards from that stolen data, and since each chip card transaction is unique, a specific transaction number can't be used again.

Contact us for more information

Call Dianne Riley at (618) 656-9090 or Michael Schreffler at (618) 235-9090 if you have additional questions about processing of chip cards or if you are interested in talking with us about what FCB can offer compared to your current processor.

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