Unity One Informs: Getting EMV Chip Ready

As more merchants migrate to EMV chip-ready terminals and more credit unions are getting chip cards in the hands of members, questions regarding "fallback transactions" are being asked.Chip_card

What is a fallback transaction?

A fallback transaction occurs when a chip card is presented to a chip-ready terminal but the transaction is conducted as a swipe. This could be due to a broken or defective chip, a network incorrectly configured or a defective chip reader.

Why is it important to understand fallback transactions?

Fraud liability.

  • If there is counterfeit fraud involving a chip-issued card at a non chip-enabled terminal, then the merchant who did not upgrade is liable--meaning the issuer (such as a financial institution) can charge back the fraud to the merchant.
  • However, if the terminal is enabled to read chip cards, but the transaction is conducted using a magnetic or mag stripe, then the issuer (financial institution) is reponsiblie for the liability for fraudulent transactions, if the issuer (financial institution) authorizes the fallback transaction.

Is it possible to counterfeit EMV cards?

For now, it is very difficult, but never say never. A fraudster could obtain credentials, then create a card with a fake chip. Since the chip is a fake, it will trigger the EMV machine not to work. The fraudster will then have to swipe his/her card, with the stolen credentials. If the issuer (financial institution) authorizes the transaction and it is fraudulent, then the issuer (financial institution) is liable.

(Source: Insights by CSCU)

Unity One Informs: What Chip Card Day means for you

Thursday, October 1 is Chip Card Day (according to various news outlets) - the deadline for merchants to have terminals in place to accept chip-enabled credit cards - but the majority won't meet it, according to the Today Show.

New data from Visa shows only 314,000 merchants - just 5 percent of the estimated 6 million retailers with physical stores -- have the technology in place as the switchover arrives.Chip_card

Consumers aren't ready to go either, according to Creditcards.com. More than six in 10 haven't received their chip-enabled cards yet. This also includes Unity One Credit Union who will be begin issuing chip credit cards in January.

Creditcards.com senior industry analyst Matt Schulz says, "Research shows that a low percentage of merchants are ready to accept these cards. Once that's established, it becomes less of a burning deadline for the issuers. Then the merchants say, 'Why are we going to put these in when the cards aren't out?'"

Jamie Topolski, director of alternative payment strategies at Fiserv has been working on EMV or Europay Mastercard VISA, an acronym for the chip-enabled payment system since 2008. He says that these conversions are gradual processes. According to Topolski, there is no deadline for when magnetic stripes will stop working. Therefore, consumers can still use their old cards for purchases.

Advice: Don't panic! This was a deadline for merchants not consumers. Starting today, if your card is used fraudulently, the merchant (if it doesn't have the chip system in place), rather than the card issuer, is supposed to be liable for the loss says industry experts. The liability never fell on the consumer before, and it won't now.

Finally, the rollout for debit and prepaid cards is taking longer than for credit cards. This is due to the difference between the U.S. debit card system and other countries. According to a survey by Discover's Pulse subsidiary, only 25 percent of U.S. debit cards (about 71 million cards) will be chip-equipped by the end of 2015. The percentage of EMV debit cards in consumers' hands is expected to reach 73 percent by the end of 2016 and 96 percent by the end of 2017.

Get to know more about chip cards, however, because they are safer than cards with magentic stripes. Here are a few FAQs to get started.

Q: What are chips cards?

A: Chip cards are payment cards that have a chip embedded in them. This chip offers advanced security and protection from fraud when used at retailers or ATMs.

Q: What is EMV?

A: EMV is a global card payment standard, currently used in more than 80 countries. There are more than 3.4 billion chip cards issued worldwide.

Q: Why are chip card transactions more secure?

A: They make every transaction unique. Also, the chip is more difficult to counterfeit or copy.

Q: Where can chip cards be used?

A: Anywhere. The card will have a magnetic stripe and a chip. This should accommodate any situation.

Q: How will Unity One chip cards be distributed to members?

A: Members will be issued their cards in the month that their cards are up for renewal, regardless of the year. For example, if Member Smith's gold card expires in January 2018, a new card will be on its way in December, even though his card does not expire until 2018. This will occur throughout 2016.

Q: How will a transaction be different with a chip card?

A: Instead of swiping cards, consumers will have to insert them into a terminal. The chip must be facing up. Then, the consumer will provide a signature or PIN when prompted. When the transaction is complete, then the consumer can remove his/her card from the terminal.

Q: Will my PIN be different?

A: For your safety, your pin will be different. You will receive your new 4-digit PIN number in the mail separately from your new card. If you have any issues, please contact Unity One.

Q: When will we see debit cards with chips from Unity One?

A: Soon; we are prepared, but let's monitor the credit card switch first. You won't be turned away from a merchant if your debit card is not chip-reader-ready.

Q: I already have a chip card. How do I use it?

A: Take a look at the infographic below.

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