EMV Liability Shift Information

EMV Payment.

EMV FAQ's for C-store retailers.

An overview from Gilbarco Veeder-Root of what EMV approval for convenience store and fueling equipment (gas pumps) involves, and the two different levels of EMV compliance, with hardware (devices) and with software (inside the device).

Across the world, a wave of change has transformed the way fuel marketers and other retailers conduct their business. “EMV” may be an alien concept to many Americans, but by this October, this EMV liability shift will be effective at most inside payment terminals.

EMV represents an effort to reduce payment card fraud.  In the U.K., card fraud is reported to have dropped by 40% after the introduction of EMV. (Financial Fraud Action U.K., Fraud, the Facts).

EMV endeavors to create a global standard for payment security using something called Dynamic Data Encryption (DDA). Through DDA, a chip embedded in the card communicates data through a process called “tokenization.” In milliseconds, data is encrypted, transmitted, analyzed and verified – or rejected.

The standard has been rolled out globally and is used in most other markets.  In Western Europe and Canada, EMV transactions are approaching 95% of retail transactions. EMV transactions are also growing rapidly in Asia, Eastern Europe, and South America. (NFC World, Nov. 2014)

In the United States, there are two important deadlines to be familiar with: by October 1, 2015, all in-store terminals should be ready to accept EMV cards; and by October 1, 2017, pay-at-pump terminals must be compatible.

The major cards are using “liability shift” to encourage the change to EMV. After the deadline dates, fraudulent transactions using magnetic strip equipment become a potential liability to the merchant.

 

Here is how Visa explains the liability shift:

Credit Card Payment Transaction Scenarios
Mag stripe card @ mag stripe terminal Merchant generally not liable
Chip card @ mag stripe only terminal Merchant generally liable – issuer has upgraded cards to EMV and merchant has not invested in upgrading
Chip card @ chip-enabled terminal Merchant not liable as an EMV card was used at an EMV terminal.

Source: http://usa.visa.com

 

EMV will, for some marketers, require a significant level of investment.  We welcome the chance to discuss with you the best options for you to optimize your financing as you consider the scope and timing of your investments.

This blog was written by Chris Santy, President, Patriot Capital and originally appeared in the Below the Line Club January 2015 Newsletter.  This article is intended to provide an introduction to payment and the EMV liability shift for indoor payment and unattended payment terminals.  We recommend consulting with your payment processing network and marketing brands for specifics related to your business situation.

EMV Liability Shift - what scenarios are a retailer liable for fraud?

This infographic from Visa explains what liability rests with the retailer or merchant and the card issuer in various payment situations.  This document shows how liability may be assessed for:

  • A magnetic stripe card used at a magnetic stripe payment terminal
  • An EMV chip card is used at a traditional magnetic stripe payment terminal
  • An EMV chip card is used at a chip-enabled terminal that has been activated by the retailer or merchant

The graphic also contains the dates for EMV adoption for in-store point of sale (POS) and for AFD (automated fuel dispensers or gas pumps) and ATM's.  

 

About EMVco

EMVCo exists to facilitate worldwide interoperability and acceptance of secure payment transactions. It accomplishes this by managing and evolving the EMV® Specifications and related testing processes. This work is overseen by EMVCo’s six member organizations —American Express, Discover, JCB, MasterCard, UnionPay, and Visa—and supported by dozens of banks, merchants, processors, vendors and other industry stakeholders.

How does an EMV Chip Card work?

A useful infographic from Visa that explains how EMV cards are designed and how EMV processing works.

Mastercard EMV Roadmap

MasterCard has developed a roadmap focused on advancing the U.S. electronic payments system while providing each customer flexibility to manage technology implementation that advances their business goals.  Information of interest to C-store owners related to gas pumps, point of sale (POS) and other payment products.

Preparing for the EMV Liability Shift - Whitepaper from Verifone

Incentives are laying the path for U.S. adoption of the EMV chip card standard, in use in most developed countries. More than 575 million chip-enabled cards are expected to be in circulation by the end of 2014 and fraud costs are scheduled to shift to merchants and acquirers that don’t meet EMV requirements.

General

This article in Fuel Marketer News by Corey Henriksen of Acquisition and Refinance Capital, Inc., provides a good overview of how to get the best financing possible for your fueling equipment including gas pumps or for a C-store acquisition.

"As a general rule, any lender, whether it’s a large national institution or your brother-in-law, will look to the following guidelines:

  • Be able to show that you have seasoned experience in operating a downstream retail petroleum business.
  • Be able to prove up sufficient cash flow to cover the annual debt service (expressed as a debt coverage ratio; usually 1.25 to 1 for gas stations).
  • Be able to show sufficient asset value of the collateral for the loan (expressed as an LTV ratio; anywhere from 60% to 85% for gas stations).

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