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What is EMV Non-Compliance?

And why am I being charged for it?!?

Posted May 16, 2018
Using an EMV chip credit card helps stop fraud.

Maybe you haven’t switched because you’re afraid of costs. Maybe you’re worried about training your staff. Or maybe you just think that changing will be a hassle. But you may now have more reasons than not to finally switch to an EMV-chip-enabled card terminal for your business. Some merchants, in fact, might have hundreds of reasons.

What are these hundreds of reasons? The non-compliance fees being charged for NOT using an EMV-chip-enabled card acceptance system. Some merchants are seeing fees close to $300 for continuing to process chip-enabled cards with a swipe-only machine.

Are the fees fair? That’s a matter of perspective. Let’s start by first understanding the need for EMV chips and where liability now lies. Then we’ll examine why retailers, restaurants, and other merchants are being assessed these non-compliance fees.

What is EMV?

What is commonly known simply as “EMV” is actually a payment method based on a processing standard. That standard, developed by Europay, MasterCard, and Visa (thus EMV), uses an embedded circuit chip in a payment card to store holder and security information about the card instead of using the more vulnerable magnetic strip method.  The protocol is now also used by American Express, Discover, JCB, pretty much everyone.

The chip allows more data to be held on the card, including a cryptographic algorithm that provides authentication of the card to an EMV-enabled terminal.  Once the transaction is complete, the card reader embeds a new code into the chip within the card. When that card is presented for its next purchase, the system reads that code to validate the cardholder is indeed the rightful owner of the card. After this new transaction is completed, another fresh code is embedded in the chip, and so the process repeats from transaction to transaction. This helps to reduce your – and the bank’s – risk.

Chip technology thwarts one particular type of fraud — fake card creation. Thieves can no longer steal your card number and name and then forge a new card. If the card is presented to an EMV-enabled device without the proper chip/authentication code, that card would not be valid and the purchase will not succeed.

And now you know why card issuers want you to embrace chip technology.

So, Why the Fee?

Essentially, the card issuers have done what they can to deter card counterfeiting fraud by creating and implementing the EMV standard. And throughout the last 3 years, merchants have been given ample time to convert to EMV card-reading terminals. Often for free.

Yet some merchants have opted to not upgrade to chip-reading terminals.

Processors know there is a higher probability of deterring fraudsters with the new EMV standard. Many have begun assessing a fee on any merchant who swipes an EMV-chip card more than 20% of the time.   (That 20% allowance covers the occasional need for a chip card to be swiped when the chip reader fails.) This fee is both to cover the higher likelihood they will need to address fraud as well as the increased administrative costs of dealing with the many risks presented by the old software and processing method associated with a purely swiped environment.

These penalty fees are being charged to merchant services providers (like Simpay), who have no alternative but to pass them on to merchants who have not upgraded to chip-reading terminals.

Want the fees to stop?  Want to protect your business against fraud? Convert your equipment.  It’s that simple.

Your Simpay team stands ready to upgrade you.  The process is quick and not expensive.  Contact us at merchantsupport@simpay.net or 866-253-2227. And if you’re not a Simpay customer, reach out to whoever provides your card processing services.  If they can’t help, feel free to give us a call.