Are EMV Chip Readers Mandatory?

Are EMV Chip Readers Mandatory?

In the wake of the liability shift, many businesses that process credit cards and providers in the payments space scrambled to become EMV compliant. Since the introduction of EMV chip readers, there has been much back and forth on whether EMV chip readers are mandatory and whether they have any implications for certain parties.

Below, we set the record straight for those still confused about EMV chip readers and their related requirements.

EMV Chip Readers and Businesses

Businesses that process credit or debit card transactions are not legally required to have a functioning EMV card reader in their store. So, if you’ve been on edge anytime an officer pops in for a coffee or drops off a squad car for a tune up, don’t fret — you won’t be walking out your business’s front door in handcuffs. EMV compliance and related standards are not regulated by the government, but by a private corporation called EMVco.

That said, it’s important to point out that, although there are set EMV standards to follow, it’s not mandatory for businesses to comply, but it is highly recommended. Why?

  • Failure to comply can be very costly. Relying on the old technology in magstripe credit cards can result in bank-initiated chargebacks, where the cardholder wins by default and the bank creates a chargeback case automatically if an EMV chip card is swiped instead of dipped. In one case study, a business was hit with a $5,368 chargeback.
  • Liability for fraudulent charges falls back on you. If a stolen or fake credit card is run on your machine, and you do not have an EMV-capable card reader, your business is liable for all related fees, not the card issuer (e.g., Visa).

While putting off upgrading your card readers may be easier than going through the motions of acquiring new ones, you leave your business vulnerable to liability, fraudulent transactions and the possibility of creating nasty habits like EMV fallback.

EMV Chip Readers and Providers

Merchant Account Providers and any companies selling or renting EMV chip readers are required to comply with EMVco standards. Still, this isn’t a legal requirement, but these providers must take certain steps to gain EMV certification. This certification will, in turn, allow businesses using their EMV chip readers to properly process EMV chip cards and avoid the issues we listed above.

EMV chip reader certification is a rigorous process that many providers are still trying to get through today, years after the liability shift. There are three levels to certification, and it is only when level three is achieved that a provider’s EMV device is fully certified.

Trends Favor EMV Chip Readers

Industry changes, such as the card issuers beginning to issue chip and PIN capable cards, continue to trend toward EMV chip readers. Without an EMV chip reader that is also customer-facing, you risk turning away more and more customers as their magstripe and chip-and-signature cards get replaced.

Safety-wise, EMV chip readers are a no-brainer. The growing adoption of this new technology has put a dent in American credit card fraud, according to Visa, which will only continue to decrease as more and more card holders adopt this new technology.

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About Ursula Librizzi

Ursula is the sales and marketing operations manager for PayJunction. She oversees daily marketing tasks and liaisons between the sales and marketing departments.

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