The 'ins and outs' of EMV

Over the past few years, there has been a lot of confusion about EMV — what is it, why do you need it, and what will happen if your card readers don't accept EMV transactions. So, what is EMV and why is it essential as we look towards the future of payments?

What is EMV?

EMV, the acronym for Europay, Mastercard and Visa, is the industry security standard for credit, debit and near-field communication mobile payments. Before EMV standards were established, credit and debit cards only had a magnetic stripe that contained limited, static data (MSD cards) that enabled payments. However, these cards are easily tampered with, leading to fraud and theft of information and money.

EMV cards incorporate a smart chip in place of the magstripe. In addition to being able to hold more information, these chip cards are practically fraud-proof due to the dynamic, one-time code created for each transaction.

EMV in the unattended industry

While EMV transactions have been used for years in retail stores, card brands have postponed EMV requirements in unattended industries like vending and self-serve kiosks. This is slated to change this year, as card brands are mandating EMV to be required for unattended contactless (tap cards and NFC) transactions and recommended for contact transactions. Additionally, the major card brands — Visa, MasterCard, American Express and Discover — have shifted the liability for counterfeit card fraud losses (previously absorbed by the issuers) to acquirers, which will then be passed down to merchants and operators, unless EMV capable cards are processed on EMV capable and enabled payment terminals.

EMV transactions

EMV transactions can be broken down to contact or contactless transactions. An EMV-contact transaction is performed by inserting the chip card into the reader, which reads the encrypted information to enable the payment. An EMV-contactless transaction can be achieved by either tapping a radio frequency identification enabled chip card or presenting a mobile wallet app, such as Apple Pay or Google Pay.

Until now, contactless transactions could be performed with an MSD card. However, tapping an MSD card or paying with a mobile wallet backed with an MSD card is not an EMV-certified transaction. After the EMV mandate takes full effect in May 2022, transactions of this type will be fined by the card brands and effectively blocked by payment facilitators/processing partners, leading to all MSD contactless transactions being declined. The card brands will then stop allowing MSD contactless transactions altogether several months later. This translates directly to lost sales for operators who haven't installed EMV-certified readers on their machines.

While swipe via MSD currently is still allowed on non-EMV certified readers, it is not encouraged, and customers themselves recognize the increased security benefits of contact and contactless transactions. Customers at a vending machine expect to pay with their credit card or mobile phone in the same manner that they pay at any retail outlet. Additionally, EMV transactions have less downgrades and related cancels when processed compared to mag swipe transactions. Currently, contact payments are the most popular way to pay at a machine when consumers have the option, with contactless EMV transactions and tap/NFC demand growing due to increased desire for contactless behavior because of the COVID-19 pandemic. However, it is important to keep in mind that contactless does not necessarily mean EMV compliant, yet EMV will be a card brand requirement this year.

How self-service equipment operators benefit

If your cashless readers are not EMV certified, the above may seem to be an expensive change that needs to be incorporated into your business. However, the exact opposite is true. Implementing EMV into your operations can help lift your gross margins by:

• Ensuring acceptance of the highest growing type of transactions — EMV contactless.
• Having the ability to accept incremental authorization for multi-vend transactions to increase average transaction value.
• Having less declined transactions.
• Ensuring your cashless investment is future-proof by accepting EMV contact/insert.
• Reducing the chargeback liability and fees as the card issuers will be responsible if it's an EMV transaction.
• Retaining and increasing location wins by reducing credit card fraud from occurring at machines on their premises.

Without a doubt, EMV is the safest way to pay for both contact and contactless transactions. To avoid lost sales and prepare for the future of payments, operators need to ensure that machines are equipped with EMV-certified devices.