WHAT IS EMV?

EMV™ is the de facto standard in the area of credit/debit card systems managed by EMVCo. EMVCo is a body formed by the international payment networks. EMVCo's charge is to manage, enhance and maintain EMV™ integrated circuit card specifications. The body also coordinates Level 1 and Level 2 device type approval activities through certification laboratories.

Level1 type approval refers to a terminals communication mechanisms, including hardware for electrical signals.

Level2 type approval refers to software at application level which supports EMV selection mechanisms, security and transaction flow.

EMV was conceived by Europay, MasterCard and Visa - hence the acronym EMV - to introduce integrated circuit card technology (also called chip card or smart card technology) for all credit and debit products. The adoption of this new technology is the first major change and challenge in payment card operating structure since the magnetic stripe came to market over 30 years ago.

The international card companies have promoted and encouraged the industry-members banks, retailers, EFTPoS suppliers, and processors - to convert to the integrated chip-based technology.

The key driver behind the conversion to integrated circuit cards is the significant reduction of fraud. Since magnetic stripe cards are relatively easy to replicate, migrating to complex smart cards will make counterfeiting much harder. In addition, card issuers, retailers and merchant acquirers are expected to benefit from improved card/cardholder authentication and validation at the point of sale, better data storage and opportunities for multiple applications on one card.

In the Nordic region and other European countries, from 1st January 2005, liability rules are changing to provide greater protection against fraud to merchants who have deployed EMV card acceptance devices that meet the global EMV standard. In practical terms, liability shift refers to a transaction authorised at the point of sale by a merchant fulfilling his/her obligations by honouring a smart payment card with an EMV-enabled and certified device. If the merchant uses an EMV compatible and certified device for end-to-end processing, the transaction cannot be charged-back. If the EMV transaction authorised is later determined to be fraudulent or the card was lost/stolen at the time of transaction authorisation, the merchant faces no liability for the loss and keeps the funds for the transaction. However, if a merchant's payment processing device is not EMV compatible on or after 1st January 2005, then the merchant must absorb the transaction loss plus any ancillary charges, such as chargeback penalty fees assessed by its acquiring bank.

The ability to accept smart cards is increasingly important for merchants regardless of type of establishment. EMV is something every merchants and acquirers need to prepare for as the liability shift date is fast approaching. The liability and payment management matters will have business and financial implications to every European merchant in 2005 and beyond.

The EMV standard also satisfies card issuer's business requirements for accommodating single to multiple applications on one payment card regardless of system operator. The EMV standard ensures global interoperability across cards, platforms and devices, establishes the magnetic stripe to chip migration path and an open platform for payment cards.

Chip cards will eventually replace magnetic stripe cards; however, in many instances, bank-issued magnetic stripe and smart payment cards will co-exist on the same card. Under the EMV regulatory guidelines, issuers must still comply with magnetic strip requirements for contingency purposes. Therefore, EFTPoS terminals in the field must have dual card type acceptance capability. This is why RAHAXI offers compact and cost effective devices designed to support magnetic stripe and EMV smart cards (i.e., hybrid terminals).

FreeStar Technology Corporation has made significant investments to make sure our authorisation, data capture and routing processes can manage the new and additional messages and security parameters from the smart card to the terminal to the appropriate financial endpoint.

End-to-end EMV compliance is a subject merchants needs not grapple with. Partnering with FreeStar’s solution for transaction processing means time, cost and management resources savings. Establishments - including multi-lane or multi-chain - can confidently route their payment messages to RAHAXI's fully EMV-compliant system for integrated circuit card processing.