New type of credit cards coming your way

At the regular meeting of the Odessa Chamber of Commerce February 10, representatives of Washington Federal Bank and of Vantiv LLC, a company that provides payment processing solutions for a wide variety of organizations, gave a presentation on the decision by Visa, American Express, MasterCard and Discover to switch from using the credit/debit cards we are all familiar with to a new type of card and processing system.

According to the presentation, credit card fraud has increased 307 percent in the U.S. since 2004, and those figures are for Visa only. That fraud has been absorbed by the card’s issuing bank. But that is about to change, as the card issuers are shifting the liability to merchants in 2015.

The deadline for merchants to make the switch to the new system is October 15, 2015. Liability for fraudulent charges on terminals that continue to use the magnetic stripe technology after this date will shift from the issuing bank to the merchant if the merchant fails to process the new card type using compatible equipment.

New cards will be issued to individuals and organizations when current cards expire. In current cards, the magnetic stripe on the back contains information about the cardholder. With the new technology, cardholder information, and more, is stored in a microprocessor chip embedded on the front of the card.

The processing system is called EMV, which stands for Europay, MasterCard and Visa, which have jointly established a global standard for the use of what are called variously integrated circuit (IC) cards, “chip cards” or “smart cards” and the point-of-sale terminals and automated teller machines that use them for authenticating credit and debit card transactions.

With the new system, the cards are very unlikely to be replicated by fraud perpetrators. The card with the embedded chip is inserted into the terminal or ATM by the owner, and it never leaves his or her sight. Portable and/or table-side devices are becoming more and more prevalent in businesses such as restaurants, for example. No longer will the card disappear with the wait staff to be processed, or in some cases to be swiped fraudulently through a “skimmer” that reads the information for use on a duplicate card.

According to Wikipedia, the EMV system was initially conceived to ensure the security and global interoperability of chip-based payment cards. MasterCard absorbed Europay International SA in 2002. The public corporation EMVCo LLC defines and manages the standard now. JCB (formerly called the Japan Credit Bureau) joined the organization in 2004, American Express in 2009, China UnionPay and Discover in 2013. EMVCo members MasterCard, Visa, JCB, American Express, China UnionPay and Discover each have an equal 1/6 interest in the standards body. IC card systems based on the EMV specification are being phased in around the world, under names such as “IC Credit” and “Chip and PIN”.

The EMV standards define the interaction at the physical, electrical, data and application levels between IC cards and IC card processing devices for financial transactions based on the ISO/IEC 7816 standard for contact cards and the ISO/IEC 14443 standard for non-contact cards (PayPass, PayWave, ExpressPay).

The United States is one of the last countries to migrate to EMV, and the statistics on credit card fraud reflect that the decision to do so is long overdue. According to cardholders surveyed in several countries by the Aite´ Group, the U.S. and Mexico have the world’s highest rates of credit card fraud with 37 percent of responders claiming illegal activity affecting their cards. In most European countries, the rate was less than 20 percent, with The Netherlands at only 8 percent. Europe implemented the EMV standard many years ago.