March 23, 2010

Payment processing in Canada: Chip and PIN technology

Chip and PIN technology is one of the most significant industry changes your business will face this year. Recently released in the Canadian market, this technology has been adopted by many merchants across the country.

What is chip and PIN technology?

Chip and PIN technology is a way of authenticating a cardholder’s identity. An embedded microchip contains the customer’s information, and a four-digit PIN is used to verify the customer’s identity. In order for the transaction to be approved, the PIN must match the information stored on the card.

Chip and PIN card systems are based on the EMV standard, developed by EMVCo LLC, whose founding members included Europay, MasterCard and Visa. These standards enforce the use of certified EMV compliant POS terminals. EMVCo LLC defines chip card and chip-reading terminal requirements by auditing and certifying merchants for EMV compliance.

How does chip and PIN technology affect your business?

Chip and PIN technology will affect your business in several major ways. It will:

• Require EMV compliant software and hardware.
• Increase transaction speeds.
• Increase customer confidence.
• Decrease fraudulent chargebacks.

Software and hardware

Some merchants are frustrated to discover that recently purchased POS terminals are not EMV compliant. Check your existing contract to see if you are EMV compliant. If you are not, determine whether you can upgrade to EMV compliant POS terminals without breaking your contract.

Speed

Chip and PIN technology speeds up transactions because customers don’t need to sign a receipt. Faster transactions mean shorter queues and wait times, improving the customer experience.

Customer confidence

Chip and PIN technology increases customer confidence because the card never leaves the customer’s hands.

Security against fraud

Chip and PIN technology’s enhanced security features reduce the risk of fraudulent chargebacks. This saves you money, and the headache of dealing with fraud.

What if you are not EMV compliant?

If you decide to not upgrade to EMV compliant devices, there are repercussions:

• As of 2010, merchants without EMV compliant devices will be fully liable for the cost of any credit card fraud directed at their business.
• In 2012, magnetic stripe cards will no longer be accepted at ATMs.
• In 2015, magnetic stripe cards will not be accepted at any point of sale.

Merchants should develop compliance plans to ensure that they are on track to meet EMV compliance targets. Speak with a VersaPay Relationship Manager if you have questions.