1. The Timeline

Each of the four major U.S. credit card issuers – Visa, MasterCard, American Express and Discover – established Oct. 1, 2015 as the day when credit card fraud liability will shift to merchants if they do not have an EMV payment system ready.

The other important, future deadlines in the U.S. are as follows:

• Oct. 1, 2016: MasterCard liability shift for ATMs
• Oct. 1, 2017: Compliance deadline for automated fuel dispensers and Visa liability shift for ATMs

2. The Effects of the Liability Shift

After the Oct. 1, 2015 deadline, the liability for card-present fraud shifts to whichever party is the least EMV-compliant when a fraudulent transaction occurs.

If fraudulent card use takes place at a merchant that has not upgraded to chip technology, the merchant assumes the fraud cost liability.

If the transaction's acquirer or processor has not offered an EMV-compliant solution for the merchant, or if the card issuer has not issued EMV-compliant cards to its cardholders, they become liable instead of the merchant.

The major card issuers' EMV conversion policies are as follows:

• Visa: The party that causes the failure of a contact chip transaction is financially liable for any resulting card-present fraud losses.
• MasterCard: If at least 95% of MasterCard transactions originate from EMV-compliant terminals, the merchant is off the hook from all data compromise penalties.
• American Express: Liability will be transferred away from the party with the most secure EMV technology.
• Discover: The party that leverages the highest level of available payments security will be the least liable, according to the issuer's risk-based payments hierarchy.

3. The Consequences of Failing to Meet the Deadline

Taking part in the EMV switch is voluntary, but failing to do so exposes businesses to fraud liability and the loss of customers who prefer to interact with businesses that offer more secure technology.

If a merchant has upgraded its technology to the EMV standard, liability shifts elsewhere. The financial institution bears the cost if it has not issued chip-and-PIN cards. And the credit card company is liable if fraud occurs after a customer uses a EMV chip-and-PIN card at the merchant.

4. EMV Card Prep Will Require Training

Visa projects that 47% of the merchant card reading terminals in the U.S. will upgrade to EMV chip technology by the end of 2015. For businesses that accept credit cards, the switch to EMV involves adding new in-store POS and office technology to accept the cards and learning how to use it.

Employees may require training on procedures for handling the new cards and policies for accepting old, non-EMV cards. With EMV cards, customers will insert their cards into a slot in an EMV card reader and hold them in place while the reader communicates with the chip on the card. Then they can enter their PIN or sign for the transaction.

Readers will be equipped to accept mag-stripe cards, and EMV chip cards will also have magnetic stripes.

5. The Transition Will Benefit Consumers and Merchants

The positives of switching to EMV technology include:

• Consumers will be better protected from fraud;
• Switching prior to the deadline shields businesses from card fraud liability;
• Consumers will learn to expect EMV terminals;
• Since most EMV terminals also accept mobile payments, merchants can also accommodate NFC-based payment systems; and
• It will create secure business environments, which leads to atmospheres of confidence and growth.