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June 2014

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As October 2015 Deadline Looms, US Retailers Face New Pressure to Accept EMV Cards

For years, US banks have continued to issue magnetic-stripe cards while the rest of the world has adopted more-modern “chip cards.” These Europay, MasterCard, and Visa (EMV) chip cards contain a computer chip that can transfer data and perform cryptology that’s used to better secure data. Now Visa and MasterCard are ratcheting up the pressure on retailers to accommodate these new cards, which increase security in a number of ways.

  • They make it more difficult to copy and counterfeit credit cards.
  • The card and terminal can authenticate each other.
  • Banks can continue to require a signature or instead require a PIN, which is much more secure.
To find out what the deadline means for US retailers—and how to turn the mandate from a burden into an opportunity—we talked to David Dorf, senior director of technology strategy, Oracle Retail.

Q. What exactly does the October 2015 deadline mean?
A. Today, retailers are responsible for about 36 percent of the burden of fraudulent transactions, which adds up to about US$1.9 billion. After the deadline, the liability for fraudulent transactions will shift to the weakest link in the transaction chain (i.e. the issuer, merchant, or acquirer). In October 2015, that number shoots from 36 percent to 100 percent in any scenario where the card has a chip but the retailer can't use it.

Q. What are the potential costs of inaction?
A. Retailers that don't upgrade their terminals will be exposed to greater liability for card fraud. For example, if a customer has a chip card but the retailer chooses to use the magnetic stripe instead, any fraud will be the retailer’s responsibility, not the issuing bank’s.

Q. And is there an upside for retailers who do comply?
A. Most definitely. As retailers upgrade their terminals to support EMV, they can use that opportunity to accommodate new point-of-sale and mobile point-of-sale payment schemes such as Google Wallet and Isis.

Q. How can Oracle help make retailers EMV-ready?
A. Oracle is already successfully delivering point-of-service solutions that support EMV cards. And unlike competitors’ solutions, ours not only leverage tokenization to avoid sensitive card data but are also built on an open platform with the flexibility to innovate going forward.

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