24 Hoosier Banker February 2016 OPERATIONS / TECHNOLOGY Community banks are hearing more and more about EMV technology. EMV ‒ which stands for “Europay, MasterCard and Visa” in recognition of the team that developed the technology ‒ involves smart-chip technology that embeds a microprocessor chip into the payment card itself to create a dynamic authentication code for each point-ofsale (POS) transaction. This individualized code prevents fraudsters from relying on the information gleaned from the card’s magnetic strip alone, placing an impediment in the fraudster’s path. However the impediment is meaningful only if the merchant processing the fraudulent transaction utilizes EMV technology. Additionally EMV technology relies upon the use of either a PIN or signature in conjunction with the microprocessor to create a secondary layer of authentication, known as “chip and PIN” or “chip and signature.” More and more payment card issuers are opting to minimize the risk they bear from potential fraud by utilizing EMV technology. The questions and answers below serve as a guide to community bankers: Are community banks going to be mandated to use this technology? Unlike other countries mandating migration to EMV technology, the United States has established a voluntary scheme that enables an individual merchant to both assess the costs and benefits of implementing the technology, and to choose whether to participate. However, because of new legislation, merchants that became EMV-compliant by Oct. 1, 2015, shifted the risk of fraudulent activity for POS transactions to the card issuers. If the merchant elects not to comply, however, it may share in, or in fact bear entirely, that liability risk. This has proven to be a strong motivation for card issuers, such as community banks, to move to chip cards. What are the risks of EMV technology? Reviews of the history of other countries which have made the EMV Technology: What You Need to Know Young & Associates, Inc. Consultants to the Financial Industry Virtual Compliance Consultant Program Annual membership includes: • Compliance Coaching • Compliance Products - policies, models, and workbooks • Automatic updates to all products • Weekly Compliance Blog • Online Compliance Forum • Monthly Phone Conference • Compliance Review/Audit Fee Discount Contact us today to find out how the Virtual Compliance Consultant Program will help you navigate the twists and turns of the regulatory compliance maze! compliance@younginc.com Feeling Lost and Alone in the Maze of Regulatory Compliance? Our expert compliance team can help! 35 YEARS 1978 - 2016 +
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