Just when we start to think we really know what we’re doing with our “technology,” something comes along to make us rethink it. Starting in October, Visa and MasterCard will hold merchants responsible for credit card fraud if they don’t have a Europay, MasterCard and Visa (“EMV”) compliant terminal. This isn’t necessarily a bad thing because you may have noticed that you recently received new credit cards from your bank and other issuers that contain embedded microprocessors. What’s great is that these electronic chips help prevent against credit card fraud. It also means that vendors who accept a fraudulent card and don’t have an EMV compliant terminal, will have no recourse – the liability for the fraud is on them. While retailers who use point of sale equipment are the ones who will be mostly affected, law firms that use a terminal will be affected as well.

Designed to protect against fraudulent transactions, credit cards are authenticated during the payment transaction, protecting against counterfeit cards. Transactions require that an authentic card is validated either online by the issuer or offline with the new terminal. These new cards and terminals authenticate the cardholder and protect against lost and stolen cards being used unlawfully. They also allow for transactions to be authorized both online and offline. For an online authorization, transactions proceed as they do today in the U.S. In an offline EMV transaction, the card and terminal communicate and use issuer-defined risk parameters that are set in the card to determine whether the transaction can be authorized. Offline transactions are used when terminals do not have online connectivity or in countries where telecommunications costs are high.

A recent survey by The Small Business Authority of more than 990 respondents found that 71% of business owners were completely unaware of this impending deadline. If your Firm or your clients accepts credit card payments – particularly on a “point of sale” basis using a terminal – you should look into this matter immediately.

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