EMV FAQs. Contact us at: Visit us online: VancoPayments.com

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1 EMV FAQs Contact us at: Visit us online: VancoPayments.com

2 What are the benefits of EMV cards to merchants and consumers? What is EMV? The acronym EMV stands for an organization formed by EuroPay, MasterCard and Visa, to create standards for card- present transactions. These standards, commonly referred to as EMV, have been implemented in most regions of the world over the past 20 years, and have proved to be a highly successful deterrent to fraud. EMV uses a computer chip on credit and debit cards rather than the traditional magnetic stripe when processing face- to- face payments, to provide added security against fraud from counterfeit and lost & stolen cards. What about EMV and card- not- present transactions? EMV does not address card- not- present payment transaction processing such as Mail Order, Phone Order, online ecommerce payments and the like. It is focused on face- to- face, card- present payments. EMV secures payment transactions with enhanced functionality in three areas: Card authentication, Cardholder verification and Transaction authorization. Unlike a magnetic stripe card, it is virtually impossible to create a counterfeit EMV card that can be used to conduct an EMV payment transaction successfully. In addition to security, EMV will strengthen cardholder confidence in merchants who use EMV solutions, and merchants may realize increased business from foreign cardholders whose cards must be processed via their chips. Also, the entire payment industry will benefit from a dramatic reduction in fraudulent transactions, since hidden costs such as fraud losses are incorporated into the cost of goods and services. Why is October 1, 2015 an important date? On October 1, liability for certain types of fraudulent transactions will shift away from card issuers to merchants who accept face- to- face card payments and have not upgraded their equipment to accept the new EMV cards (also called smart cards or chip cards) when an EMV card is presented. If the card presented is not a smart card, then the change in liability is not affected. See the answer below for the timeline of EMV card adoption. EMV FAQs Page 1 of 5

3 What card issuers are part of the EMV change and when will cards have the smart chip? EMVCo is owned by all of the major card brands. In addition, several major banks, payment processors, retailers, payment hardware and software providers and stakeholders comprising all aspects of the payments industry are involved in and endorse the EMV initiative. Therefore, the EMV change coming later this year applies to all card brands. There will be issuers who choose to issue chip cards to their cardholders only when current cards expire, or on their own timetable. Therefore, all cards may not have a chip on them by the end of How is EMV specifically affecting card- present payments? EMV will require point of sale devices to have a slot that enables the chip card to be inserted and read during a payment transaction. The card is inserted into the slot on the POS device when prompted, and data from the chip is transmitted and analyzed by the issuer as part of payment authorization approval processing and end of day settlement. Data is written back onto the card as part of the payment approval, ensuring that ongoing use of the card remains secure. It is a multi- faceted change to the way card- present payments have been processed with traditional magnetic stripe cards. What does my organization need to know about EMV? The bottom- line for organizations that accept credit or debit cards is that they must upgrade their equipment to accommodate the new smart cards, in order to avoid the upcoming liability shift. The liability shift will apply to card- present transactions processed from POS terminals, mobile SmartPhone/tablet applications, and virtual terminal or integrated POS systems. Is EMV a requirement? While EMV is neither a mandate nor a compliance requirement, upgrading to an EMV enabled solution can significantly protect your business from fraud losses. What if I don t upgrade to an EMV solution? As of October 1 st, 2015, you, the merchant, will become liable for fraud related chargebacks for face- to- face transactions from cards that have chips on them, if the transaction was completed on a non- EMV certified terminal. Historically, these fraud losses have been absorbed by the card issuer. In addition, as consumers become more familiar with EMV at the point of sale, your business may start to erode due to lack of consumer confidence in your payment security, as EMV becomes the new security standard in the marketplace. EMV FAQs Page 2 of 5

4 What do I need in order to become EMV ready? Vanco is starting to offer EMV solutions on POS terminal products at this time, and is currently upgrading its Mobile Access and Virtual Terminal offering to support EMV. EMV will require card reader hardware that accepts chip cards, and software that processes the data from and to the chip. If your current payment solution includes EMV- capable card reader hardware, you may only need a software download to start processing EMV cards. Otherwise, both hardware and software upgrades may be required. Vanco will have solutions available for all payment processing environments between now and this summer, and will contact you regarding converting your POS environment to accept EMV. How do I stay informed about Vanco s EMV offering? Vanco will be communicating to our clients via and website updates, and our Client Services personnel will be able to answer questions you may have about EMV products and timeframes. Please visit vancopayments.com/emv and fill out our customer survey at your earliest convenience, to be sure we have you on our radar. Will my processing fees change with the move to chip cards? No. Fees are not expected to change. What is the difference between EMV enabled and EMV certified? EMV enabled terminals have a slot available for reading a chip. An EMV certified terminal has software which reads the chip and passes the information to the processor. Why do we have to go through all of this for a technology that was developed 20 years ago? Until recently, the U.S. has been the only region of the world that has not acted to enable EMV technology. There is now compelling evidence that EMV smart cards reduce card- present fraud more than the current magnetic stripe. Is there going to be a time when I can refuse magstripe cards and only take chip cards? Not in the foreseeable future. A terminal which reads a magnetic stripe is viewed as a backup for chip card processing. Do these cards wear out like the magstripe cards? Not from a practical perspective. Chips should last from 500,000 to 1 million reads, which is more than a card will ever be used in today s world. However, there will be occasional chip errors and other reasons for a card to be replaced. EMV FAQs Page 3 of 5

5 Will stores have to accept it or will it be refused? It is not a mandate at this time, so the answer is no. This could change in the future, but if it does, the card associations will give advance notice so the payments infrastructure can adjust to new mandates. Do you think issuing banks are going to charge for these cards or find a way to make up the cost to issue them in other ways? No. The cost to manufacture an EMV chip or smart card is only about $1- $2 more than for a mag stripe card. Therefore, the cost is expected to be absorbed by issuers, as is the case today for issuers who have started issuing EMV cards as current mag stripe cards are expiring. Neither interchange increases nor merchant fees are expected. What if the cardholder is prompted to enter a PIN, but they don t know their PIN? If this is the first time they have made a purchase using the chip on their card, this may be the first time they have been prompted to enter a PIN. For issuers who are using Chip & PIN, the issuer mails their cardholders a PIN as part of issuing an EMV/chip card, and they inform the cardholders in writing they will need to use their PIN when processing transactions at POS devices that accept chip cards. Unfortunately, very few merchants are using EMV applications at this time. Therefore, this is probably going to be a common situation as the migration of the U.S. marketplace toward EMV starts taking hold. If this situation arises, the first alternative may be for the merchant to ask the cardholder to use a different card. The second is to key the card, assuming the merchant elects to process the transaction as keyed and to accept the associated fraud risk. Can I issue a void or refund over the phone if the customer paid in person with a chip card? Yes. The only exception to date is that Apple Pay initiated transactions require the phone to be tapped to the POS device in order to process a refund. This is because the identifier used to get the original authorization is a token representation of the card number rather than the card number itself. Therefore, the token is required to perform a refund. Does the merchant still need to ask for cardholder ID for an EMV transaction? Yes. Merchant best practices for payment acceptance is always recommended. Examining a customer s ID and comparing the signature on the customer s ID with the receipt signature when the card is Chip & Signature should always occur, regardless of whether the card is a mag stripe or an EMV/chip card. These measures increase the likelihood of a problem- free transaction. EMV FAQs Page 4 of 5

6 Is it true if you remove the card from the slot prematurely, the transaction will continue, but will then fail at the end? Yes. The payment application instructs the cardholder to leave the card in the slot until instructed to remove it. The terminal software does not continuously monitor whether the card is still in the slot throughout the processing sequence of the transaction. The application interfaces with the card slot reader and card when it is supposed to read or write data to the card. This is why, after successfully reading the data from the chip, the transaction continues to process (even if the card is removed prematurely from the slot), until the application attempts to write data back onto the card at the end of the transaction, at which time the transaction will fail with an appropriate message to the merchant. EMV FAQs Page 5 of 5

7 VANCOPAYMENTS.COM About Vanco Payment Solutions Vanco Payment Solutions is focused on addressing the unique needs of clients that count on predictable, recurring revenue. Faith-based and other relationship-oriented organizations and the software providers and professional associations that serve them rely on Vanco s specialized approach to adding electronic payment options and enhancing current capabilities. The company s experienced team helps more than 30,000 clients across the U.S. conveniently, securely and efficiently accept a broad range of electronic payments, and more effectively manage their operations. Industry leaders Vanco Services (founded in 1998) and Veracity Payment Solutions (founded in 2007) recently merged to form Vanco Payment Solutions.