Tuesday, September 9, 2014

Squeeze play on business: Shifting liability

Category: Blog
credit cardBusinesses large and small that accept credit cards in the United States are facing a harsh reality when it comes to fraud liability. In October 2015, most all major credit card companies will shift liability for data breaches and fraudulent purchasing onto businesses that have failed to adopt upgraded card security technology. What does that mean to businesses and their consumers?
For some time, there has been technology considered more secure than the old magnetic stripe on credit cards. Though used in other countries for several years, U.S. merchants have been slow to adopt the EMV global standard. The technology places a “chip” right on the card for use with verification software.
What is EVM? It’s an acronym for Europay, MasterCard and Visa. Members of this standard-setting facility include those entities plus American Express, Discover, Japan Credit Bureau (JCB) and China Union Pay. Their objectives include making the secure use of credit and debit cards seamless around the globe.
If companies in a country refuse to adopt better security technology yet the credit card companies are expected to absorb the cost of fraudulent data breaches, it won’t be long before the card issuers are unfairly or possible critically impaired. In a world that relies on “plastic” to buy a cup of coffee or pay a college tuition, an impaired credit company could spell disaster for consumers. That’s another reason why credit card companies are looking for universal technology upgrades.
The card companies have taken the only step that seems reasonable which is to shift the liability for data breaches back on retailers who do not adopt reasonable security technology. The consequences for non-compliant businesses whose data is breached could mean the end of those enterprises. The notion of a business being protected for unauthorized use of a card goes right out the window – the business will be bare.
Each credit card company has different milestones in implementing their expectations for conversion to EMV but the date most commonly agreed upon is October of 2015. Some card issuers are staggering their roll out to exempt fuel dispensers (gas stations) until 2016 or 2017.
There seems to be a distinction between what is known as “card-present” and “contactless” transactions. Card-present would be a merchant with a clerk or waiter facilitating the transaction while contactless purchases would be over-the-phone, online, kiosks and ATM transactions.