Accepting credit cards just became a riskier and more expensive proposition for small business owners. As a law firm specializing in data breach prevention and response, we know that the United States lags behind comparable markets globally in credit card security. As a result, the nation has experienced a marked increase in credit card fraud in recent years. To combat this rise, major U.S. credit card issuers have introduced chip-cards, also known as “E.M.V.” cards, which is the worldwide standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. (E.M.V. stands for Europay, MasterCard and Visa, the companies that created the standard). Chip-card technology frustrates counterfeiters accustomed to stealing and duplicating the static data on magnetic stripe credit cards. The transition to chip-card technology coincides with a shift in liability for fraud. On October 1, 2015, the liability for card-present fraud shifted to whichever party is the least E.M.V.-compliant. If your business fails to upgrade to E.M.V.-compliant technology, you could bear the cost of a fraudulent transaction at your point of sale.
Credit card fraud in the U.S. has doubled in the past seven years, largely due to increased protection in the rest of the world resulting from the widespread adoption of E.M.V. cards. Banks and merchants lost over $16 billion dollars in 2014 on fraudulent transactions. Nearly half of these targets were based in the U.S., which accounts for only 21 percent of the world’s card transactions. Thieves obtain card information through data breaches and card skimmers and produce duplicates of the cards using the stolen data. Chip-cards will not protect against fraud following physical theft and offer no added protection online. However, roughly fifty percent of credit card fraud occurs onsite and accounted for 13.7 million fraudulent transactions in 2012 totaling $2.3 billion in charges. Aligning credit card security in the U.S. with other major global markets should diminish the disproportionate targeting of American merchants.