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Transition to chip cards exposes merchants to new liabilities

On Oct. 1 of last year, the liability for counterfeit credit cards moved from the card issuers to merchants.

By James W. Gow Jr., CPCU, AU | Updated on February 16, 2016

This new chip card technology — called EMV, which is short for Europay, MasterCard and Visa —sends a one-time code to process payments, rending duplication efforts useless and thereby increasing payment security.

Unlike credit cards using a magnetic strip to store payment processing information that does not change, chip-enabled cards are difficult to counterfeit. They use a unique code that can’t be used more than once. If a hacker steals credit card information from a chip-enabled card, it’ll be denied at the point of sale. The change is designed to reduce counterfeit card fraud, which makes up 37% of all credit card fraud in the U.S.

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