EMV Deadline For Card Readers Is Here Are You Ready To Abandon Magstripe?

The switch from magstripe credit and debit cards to chip-and-pin technology goes into effect Oct. 1. The date is not so much a dreaded deadline as a line of demarcation beyond which the burden of fraudulent transactions is transferred from credit card companies to merchants and banks. Called "liability shift," the new rules state that the entity without the new technology carries the fraud burden. As motivation to adopt new technology goes, this one is more ominous stick than tasty carrot.

For those not closely following the changeover, the new technology is called EMV, which denotes Europay, MasterCard and Visa, the three companies that created the standard. The system is managed by EMVCo, a six-member organization (American Express, Discover, JCB, MasterCard, UnionPay and Visa).

Not all merchants, including those operating vending machines, are ready for the switch that requires new card readers. Consumers are also lagging behind. According to a recent survey, 59% of consumers have not received their new chip-enabled cards. This has not caused any kind of panic, since only 32% are even aware of the changeover.

This kind of lag time was expected by the banks and credit card companies. Although the technology has been widely used and proven in Europe, Canada made the technology shift more than a decade ago, but has not yet achieved full implementation.

According to the Payments Security Task Force, eight of the largest financial institutions reported that 30% of their U.S. consumer credit and debit cards had EMV chips as of June 30. These issuers represent approximately 50% of U.S. payment card volume. However, that number is expected to grow. The organization forecasts the number of chip cards in the U.S. from these issuers will expand to 60% by the end of this year, and to 98% by the end of 2017.

"The latest forecast demonstrates the tremendous progress made to make chip cards a reality in the U.S. Consumers are the winners, as issuers and merchants are both working to deliver greater protections when paying for a purchase," said Chris McWilton, president of North American Markets at MasterCard.

However, those operators with debit and credit card capable equipment have even more motivation to make the switch from magstripe to EMV. The new card readers are well suited for contactless transactions, making them compatible with new smartphones featuring NFC payment apps. Additionally, merchants who don't make the change to the backwards-compatible units could be targeted by increasingly sophisticated thieves on the lookout for outdated technology.

Even more, credit card fraud risk for vending is very low, way below 1%, according to some industry experts. Additionally, many operators have merchant's agreements with providers, which will mitigate their liability in the event of fraud, if they are in compliance with those agreements. That said, vending and amusement equipment could continue to accept magstripe cards, and operators will have time to ease into the new EMV standards, which will require an investment in compliant readers.