Q: What’s the deal with EMV and the so-called “liability shift”?​

 

A: EMV, which stands for Europay, Mastercard and Visa, is the global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. The nationwide EMV migration is well underway, with banks issuing new credit cards with EMV chips to their customers every day. EMV or chip cards, which encrypt bank information, are considered more secure than the old magnetic stripe cards. This is important, since the United States has a pretty serious issue with credit card fraud.

So how will this affect your restaurant? For starters, you’ll need a new processing device to read the information in the chip cards if you haven’t already purchased one. And as of October 2015, businesses that don’t use an EMV processing device could be on the hook for fraudulent chip card transactions. If your POS system or credit card processor lacks EMV capability, you will either have to spend money to upgrade your hardware to be EMV-compliant, or the chargebacks will be significant—and you’ll be the one paying the price. This is called the “liability shift.”

Not that long ago, if you ran a fraudulent card for a transaction at your pizzeria, the banks had to absorb the costs. Not anymore. Now, if someone pays you with a fraudulent chip card and you’re not set up with an EMV card reader, it’s possible that you will have to eat the costs, not the banks.

Also in the recent past, many merchants simply buried their heads in the sand, pretending they will never be affected by customer chargebacks. This is a big mistake. If you accept chip cards at your restaurant—and there are more and more of them—you need to upgrade to a compliant card reader.

You should also keep in mind another problem: Some tech-savvy customers are taking advantage of this situation to get free meals. If your restaurant’s service or food doesn’t meet the customer’s expectations and he knows you didn’t run his card with an EMV device, he may simply call his credit card provider and negate the charge, knowing that you’ll be on the hook. Thanks to social media, more and more customers are aware of this option, so restaurants must protect themselves with the right technology!