How to Prepare for the EMV Liability Shift

PRINCETON JUNCTION, N.J. — Retailers planning to have EMV (Europay, MasterCard and Visa) capable card readers by the liability shift responsibility deadline of Oct. 1, 2015, need to start testing these new point-of-sale (POS) devices by January or February, according to John Drechny, senior director of payment services for Wal-Mart Stores Inc.

Drechny was the key presenter Thursday in a webinar entitled "Merchant Considerations for U.S. Chip Migration," hosted by the Princeton Junction-based EMV Migration Forum.

Convenience store retailers need to have EMV terminals deployed by the spring of 2015, he noted, especially for operators that utilize customized software. In this case, the new EMV POS readers must undergo a certification process.

"Start making the conversion early. There could be issues you face," he said. "For example, when we made the conversion to EMV, we had an issue regarding POS slot insertions that needed to be fixed."

In slightly more than one year, the four major U.S. credit card providers — Visa Inc., MasterCard Inc., Discover Financial Services and American Express Co. — can hold merchants financially responsible for fraud occurring at non-EMV-enabled POS locations. EMV is generally characterized by a chip-and-PIN process intended to cut down on credit and debit fraud.

It's important to note that next year's EMV liability shift deadline is not mandated by law. Hence, retailers are not required to upgrade to EMV-capable readers if they are willing to take on the financial responsibility for potential fraud. 

Drechny acknowledged that converting or purchasing new EMV-ready terminals could be costly for some retailers. Walmart had an internal meeting to determine what its potential liability expenses could be if the big-box retailer did not convert its POS terminals.

"We were shocked by how large that number could be," Drechny revealed during the webinar. The retail giant now has EMV-ready readers at 97 percent of its stores.

If c-store retailers decide to implement EMV-capable POS readers by next year's deadline, the Walmart executive emphasized that the first goal needs to be making sure the customer experience is not negatively impacted. Subsequently, hardware implementation should be completed, followed by software updates. Once these implementations are in place, the store operator and its employees need to be trained on the new payment process.

"You definitely can't begin the implementation process in October 2015," he stressed. "The sooner you start, the better you educate yourself and the more you are engaged."

EMV IS COMING

Not long ago, the October 2015 liability shift deadline was looked upon skeptically by experts. Many thought the deadline would be pushed back, especially because there are so many U.S. banks and making EMV upgrades is a laborious process. But due to the many high-profile data security breaches in recent months, including ones at Target Corp. and Home Depot Inc., EMV cards and capable readers will soon become omnipresent, said Randy Vanderhoof, director of the EMV Migration Forum.

In the United States, 120 million EMV cards — representing 10 percent of all credit cards — are expected to be issued by the end of this year, according to Vanderhoof. Approximately 4.5 million terminals (37 percent) will be EMV ready by the end of the year.

By the end of 2015, 70 percent of all credit cards (about 600 million) are expected to have EMV capability, he cited.