1. Use of a PIN vs a signature
Using a PIN will reduce the number of disputed transactions between merchants and customers.
Merchants are no longer responsible for verifying the customer as the true cardholder by checking the signature. CHIP technology will authenticate the cardholder regardless of whether the authorisation was sought online or approved offline (eg the transaction was below the floor limit).
There will be fewer circumstances in which chargebacks will be allowed against merchants.
2. Reduced fraud and improved security
Online transactions:
The smart card will be verified by the issuing bank to confirm that the card is genuine.
Offline transactions:
Unlike magstripe cards, which can be 'skimmed', information on a smart card is virtually impossible to copy. Smart cards use a new encryption technology that authenticates the card as being genuine at the Point-of-sale.
3. Efficiencies and opportunities
Smart cards mean cost reduction, as there are fewer telecommunications traffic and central processing time.
Customers' smart cards can also be programmed with merchant rewards and other value-add programmes.
Impacts
It is important for merchants to ensure that Point-of-sale solutions are CHIP-enabled, ie Point-of-sale solutions have the requisite hardware and software to accept smart cards and process data from the CHIP.
Previously, merchants and banks carried most of the risk and liability for fraudulent transactions. But now the liability for fraudulent transactions has shifted to the party who isn’t compliant with EMV CHIP technology. So, if a fraudulent transaction could have been prevented by CHIP technology, but the card issuing bank or the owner of the point-of-sale device (merchant/bank) wasn’t compliant, then the bank or retailer will be liable. Who is the liable party will be determined following an investigation.
