What E-Commerce Retailers Need to Know About the New EMV Chip Credit Cards


Did you notice a credit card influx in the mail the last few months?  This credit card influx was due to new changes made in the payment processing industry, requiring U.S. credit card issuers and brick-and-mortar retailers to update their cards and terminals to the latest fraud protection requirements also known as EMV (an acronym for Eurocard, MasterCard, and Visa – the three companies behind the standard).

The new EMV standard reduces fraud at point-of-sale terminals by making it more difficult for fraudsters to counterfeit physical credit cards by adding a microchip into the credit card. This latest generation of credit cards is referred to as smart cards, chip cards, or IC cards. This update was only expected to have an impact on card-present merchants; however, there are two indirect effects that e-commerce card-not-present retailers should be aware of.

Card Reissuance In some cases, card issuers updated the credit card account information on the new chip cards, which means that subscription and continuity billing need to be updated before automatic payments can occur.

Neeraj Gupta, senior project manager at Vantiv, commented on the massive card reissuance"When issuing banks replace existing cards with their chip card successors, many will also change the card number and/or the expiration dates. For eCommerce merchants offering a saved card-on-file (e.g., recurring services), this can spell trouble in the form of broken subscriptions and increased customer attrition, which are both bad for business."

Online Fraud - Is expected to increase as fraudsters look for other avenues to beat the system now that POS fraud is more difficult. As EMV went online internationally, point of sale fraud decreased, whereas eCommerce card-not-present fraud increased.

Source: frbatlanta.org

Mr. Gupta also commented, "eCommerce merchants would be wise to ensure that their fraud prevention and account update strategies are in order. That way, they can keep the cost of payment fraud down while maximizing customer lifetime value. While there are companies, including Vantiv, that offer services to address these indirect effects, the most important thing for merchants to do is to ensure they've implemented an effective strategy to address these issues."

If you haven't already, you may want to check with your payment processor to see what tools they have in place to help mitigate the indirect impacts of the new EMV standard. Some payment processors have tools that can automatically update credit card information for your subscriptions when they change, as well as tools treduce and fight fraud.


About The Author

Patrick Moulton specializes in logistics and marketing with 15 years of industry experience. He is currently enrolled in the USC Marshall School of Business Executive MBA program.