EMV and Other Credit Card Processing

Changes
Bret Johnson Sr Director of Sales
2014 Total System Services, Inc.

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Chip-enabled EMV Cards
EMV

(Europay, MasterCard

, Visa

) is a global standard for secure

and convenient payment using bank cards and the EMV payments
infrastructure. EMV began in France in 1992
The use of EMV contact and contactless cards for secure payments
offers multiple benefits:
A common certified standard for processing transactions ensures
global interoperability
Better authentication of cardholder data than magnetic stripe cards
Fraud risks are minimized by authenticating during online transactions
Digital seal or signature stored in the cards chip proves authenticity
of the card for offline transactions
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Intelligence on the card supports
Card Authentication Method (CAM)
Verifies that the card is authentic; hasnt been counterfeited
SDA, DDA, CDA

Cardholder Verification Method (CVM)
Verifies the individual using the card
Adjustable to all card acceptance environments
Online PIN Verified at the host, just like today
Offline PIN Verified by the card
Signature Verified by the cashier
No CVM Required Just like no-signature and tap-and-go today

The CVM can be affected by other transaction details
(e.g. amount)

EMV Counterfeit Card Fraud Elimination
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Affects all Acquirers merchants,
merchant processors, ATM
acquirers. What AIDs and how many
will their devices recognize and
support?
Affects all Card Issuers What brands and
networks do my cards belong to? What AIDs and
how many do I need to load onto my cards?
What AID/App is supported by my card
brands/networks? How will I personalize and
configure the card based on functionality I want
to offer my cardholders?
Introduction to the AID and Application
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VISA AID
MasterCard AID
American Express AID
Discover AID
Diners AID (International only)
AID: Application ID

Application: Underlying EMV application on the card

When an EMV terminal encounters an EMV card,
it must determine the correct AID and associated application

It is the application on the card that knows how to behave with
the terminal and construct the EMV transaction recognized by
the Card Network and Card Issuer
First U.S. EMV Credit Cards

Credit Only Card

Single Brand

Single AID & Associated Application

Single AID and App supports both
Domestic and International Credit

Example: U.S. Credit Card
Example: VISA AID
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EMV Deployment
Milestones
Key Dates Visa MasterCard Discover
American
Express
Notes
PCI Audit Relief October 2012 Y Y
PCI Audit Relief October 2013 Y Y
POS Acquirer / Processor
Compliance
April 2013 Y Y Y Y Mandate for POS Acquirers
Maestro ATM
Liability Shift
April 2013 Y
Inter-Regional Maestro Cards at U.S.
ATMs
Visa ATM EMV Mandate April 2015 Y Y Y
U.S. Third Party ATM acquirer
processors must be able to support
EMV chip data for all Visa and/or PLUS
branded products
POS Counterfeit
Liability Shift
(Excluding Fuel Dispensers)
October 2015 Y Y Y
Liability shift for merchants excluding
AFD
POS Lost or Stolen
Liability Shift
(Excluding Fuel Dispensers)
October 2015 Y
Liability shift for merchants excluding
AFD
MasterCard ATM
Liability Shift
October 2016 Y All MasterCard Branded Cards
Visa ATM
Liability Shift
October 2017 Y
Liability shift for all U.S. ATMs for all
Visa and/or PLUS branded products
POS Counterfeit Liability Shift
for Fuel Dispensers
October 2017 Y Y Y Y Liability shift for AFD
POS Lost or Stolen Liability
Shift for Fuel Dispensers
October 2017 Y Y Liability shift for AFD
Current Mandates / Liability Shifts
Published U.S. EMV Mandates and Liability Shifts
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Pymnts.com Interview Q & A
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2. Many countries have already adopted EMV standards, but is EMVs relevance
shifting now that there are many ways to secure data transmitted during a
payment?

EMV is not really about securing data, it is about authentication. Data on the transaction,
generated by the chip, authenticates the card to the issuer, ensuring that it is not a
counterfeit or "cloned" card. EMV transactions may also include a PIN, even for credit
cards, which authenticates the cardholder to help prevent fraud through lost or stolen
cards. EMV is still the best existing technology in use today to authenticate cards and
cardholders.
Methods of securing data during transmission, such as encryption, help protect the
sensitive credit card information, but do nothing to address authentication.

3. The countries that face EMV adoption now are living in a very different world
than EMVs initial adopters. Whats the significance of EMV in a world thats
moving to a cardless environment?

One of the major reasons for the initial adoption of EMV in Europe was to provide a way
of authenticating cards and cardholders in offline environments when communications
were unreliable or prohibitively expensive to authorize every transaction online.
For more information, visit www.emv-connection.com
How does NFC relate to EMV?
Near Field Communication (NFC) is a complementary technology that
EMV can utilize to enable contactless payments such as with mobile
wallets. With the anticipated growth of NFC-enabled mobile devices for
contactless payments and other applications, EMVCo has been active in
defining the processes for supporting EMV mobile contactless
payments.
Consumers and businesses can benefit from NFC in several ways:
Interactions are initiated by a simple tap of the device
NFC is flexible; it is suitable for a broad range of uses in different industries
and environments
NFC technology follows universally implemented ISO, ECMA, and ETSI
standards
Transmissions are short range
NFC works with current contactless cards and readers
All of the SE technology shown employs the same security and functional architecture of a
payment application residing on millions of EMV cards today. Depending on the mobile device
and payment model, the secure element may either be hosted in an embedded device, in a
removable SIM/UICC or in a separate device (e.g. a microSD card).
NFC and Mobile
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1. Why are EMV credit and debit cards and EMV payment transactions secure?
EMV secures the payment transaction with enhanced functionality in three areas:
Card authentication, protecting against counterfeit cards.
Cardholder verification, authenticating the cardholder and protecting
against lost and stolen cards.
Transaction authorization, using issuer-defined rules to authorize transactions.

EMV cards store payment information in a secure chip rather than a magnetic stripe; the personalization of EMV cards is done
using issuer-specific keys. Unlike a magnetic stripe card, it is virtually impossible to create a counterfeit EMV card that can be
used to conduct a EMV payment transaction successfully.

2. How does EMV address payments fraud?
First, the EMV card includes a secure microprocessor chip that can store information
securely and perform cryptographic processing during a payment transaction

Second, in an EMV transaction, the card is authenticated as being genuine, the cardholder
is verified (PIN or Signature), and the transaction includes dynamic data

Third, even if fraudsters are able to steal account data from chip transactions, this data
cannot be used to create a fraudulent transaction in an EMV or magnetic stripe
environment, since every EMV transaction carries dynamic data

Fourth, EMV methodology can also potentially address card-not-present (CNP) fraud, with
cardholders using their EMV cards and individual readers to authenticate Internet
transactions
Previous Frequently Asked Questions
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The Target Breach
Will This Speed Up EMV Adoption?
2014 Total System Services, Inc. All rights reserved worldwide.







The answer is yes, but not for the reason you
would probably think. EMV would not have
prevented the Target breach. It was caused by
lack of network security. However, it did bring
light to the problems of credit card data security
in the US.
There's general agreement that EMV alone
would not have prevented the Target breach, in
which thieves accessed data from as many as
110 million customer accounts. But EMV would
have reduced the value of the information by
making it almost impossible to clone the cards.
2013 Total System Services, Inc. Confidential and proprietary. All rights reserved worldwide. #
Why is the US slow in implementing EMV?

One reason could be because of cost. Traditional magnetic
stripe cards cost about $2.00, chip card can cost between
$15-$20.
Another problem with improving card security is that new
cards will require new readers, and that presents a big
expense for merchants. Mag card readers typically cost
about $20 in volume purchases while a chip reader costs
about $100
2014 Total System Services, Inc.

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2014 Total System Services, Inc.

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More Information--
Canada started the EMV conversion in 2003
and is now about 85% complete.
Implementation cost in the US estimated to be
about $6 billion, 75% will be borne by
merchants (Target estimates their cost to be
about $100 million)
There are 1.1 billion credit and debit cards in
circulation, only 15 million chip cards issued in
the US
2014 Total System Services, Inc.

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More Information--
Canada started the EMV conversion in 2003
and is now about 85% complete.
Implementation cost in the US estimated to be
about $6 billion, 75% will be borne by
merchants (Target estimates their cost to be
about $100 million)
There are 1.1 billion credit and debit cards in
circulation, only 15 million chip cards issued in
the US
If I spend the time and money to upgrade to
chip accepting parking equipment, will I get
lower interchange rates?
While this is the case in Europe and
Canada, at this time it does not appear that
the card brands are going to do this in the
US.

2014 Total System Services, Inc.

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Does EMV replace PCI DSS?
The answer is no, you will still need to
do an annual assessment. PCI DSS is to
try to prevent credit card data beaches.
EMV is designed to prevent fraud.

2014 Total System Services, Inc.

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What do you need to do now?

Speak to your equipment companies about
their plans for EMV conversion

The reality is that parking is a low fraud risk
and implementation of EMV may be slow in our
industry Be aware, but these is no need to
panic
2014 Total System Services, Inc.

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Questions

2014 Total System Services, Inc.

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Visa Mastercard Settlement Dec 13,
2013
A federal judge gave Visa and MasterCard the
go ahead on a $5.7 billion class action lawsuit
to resolve merchant complaints regarding the
swipes fees they are charged. There is a great
deal of dissatisfaction from many retail
organizations because the deal does nothing to
reduce swipe fees or keep them from rising in
the future.
2014 Total System Services, Inc.

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The settlement does allow merchants to
surcharge if customers use Visa or
MasterCard. However, because of
competition and all of the regulations
regarding surcharging, few merchants
are doing this.

2014 Total System Services, Inc.

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Merchant Additional Fee Programs
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January 2014
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Agenda
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Convenience Fees
Special Payment Network Programs
Merchant Surcharging
Programs At-A-Glance
Merchant Surcharging
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Merchant Surcharging
Visa and MasterCard modified their rules effective January 27, 2013 to permit
surcharging as part of a litigation settlement.
No MCC restrictions.

Permitted in all acceptance
environments, provided merchants
state permits surcharging.
Several states have laws prohibiting
surcharges. Where laws conflict with
Visa/MC rules, merchants should adhere
to the law.

30 day advance notification /
registration required.
Visa
MasterCard
Discover
Acquirer


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Not permitted on debit or prepaid
activity.

Variable or flat/fixed amount
permitted; surcharge amount may
not exceed 4% or the merchants
average cost of acceptance,
whichever is lower.

Must be included as a part of the
total amount of the transaction at
time of settlement.




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Merchant Surcharging (cont.)
Discover modified their Op Regs in Mar. 2013 to include surcharge notification
/ registration & consumer disclosure criteria which aligns with that of V/MC.
If a merchant elects to surcharge,
they must impose surcharge on ALL
credit card transactions accepted,
regardless of network.

Permitted at brand level or product
level.

Permitted on non-U.S. issued credit
cards accepted at a U.S. merchant;
including U.S. territories.

Specific fields containing surcharge
information must be supplied at the
time of transaction and passed
through acquirer to Visa and MC.
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Must not be assessed by any third
party. May only be assessed by the
merchant that actually provides the
goods or services to the cardholder.

Merchants must surcharge MC &
Visa on the same terms and
conditions as any equal or higher
cost competitor that imposes limits
on surcharging.

Surcharging practice disclosure
required at point-of-entry and point-
of-sale. Transaction receipt must
contain a line item with the actual
surcharge amount.









25
Programs At-A-Glance
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Restricted to specific
government & education
MCCs
May be assessed in any
environment
Variable or flat/fixed amount
Separate transaction
Assessed by merchant of
record OR 3
rd
party service
provider
May be assessed on all
cards
Registration required


Special Payment
Network Programs
Programs At-A-Glance
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No MCC restrictions
CNP environment only
Flat/fixed amount
Single transaction
Assessed by merchant of
record
Assessed on all payment
methods accepted

Convenience Fees

No MCC restrictions
May be assessed in any
environment
Variable or flat/fixed amount
Single transaction
Assessed by merchant of
record
Must not be assessed on
debit or prepaid activity
Registration required

Surcharging
Merchants are not permitted to apply more than one additional fee program to cardholders.
Payment Network Rules
No Signature Programs
August 2013
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No Signature Program Rules
Program Names

MCC Eligibility

Transaction Criteria

Benefits

Resources
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Program Names
Visa
Visa Easy Payment Service (VEPS)

MasterCard
Quick Payment Service (QPS)

Discover
No Signature Required (NSR) Program

American Express
No Signature Program









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MCC Eligibility
Visa
98% of businesses eligible to accept Visa may participate. Merchants with the following
21 MCCs are ineligible to participate:













MasterCard
All merchant categories qualify, except quasi-cash, money transfer, direct marketing and
gambling.





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MCC MCC Description MCC MCC Description
4829 Wire Transfer Money Orders 6011 Financial Institutions-Automated Cash Disbursements
5542 Automated Fuel Dispensers 6012 Financial Institutions-Merchandise Svcs
5960 Direct Marketing-Insurance Services 7995 Betting, incl. Lottery Tickets, Casino Gaming Chips, Off Track
Betting & Wagers at Race Track
5962 Direct Mktg-Travel Related Arrangement Services 9405 Intra-Government Purchases (Gov. only)
5964 Direct Marketing-Catalog Merchants 9700 Intl Automated Referral Service (Visa use only)
5965 Direct Marketing-Combination Catalog & Retail
Merchants
9701 Visa Credential Server (Visa use only)
5966 Direct Mktg-Outbound Telemarketing Merchants 9702 GCAS Emergency Svcs (Visa use only)
5967 Direct Marketing-Inbound Telemarketing
Merchants
9751 UK Supermarkets-Electronic Hot File
(Region use only)
5968 Direct Marketing-Continuity / Subscription
Merchants
9752 UK Petrol Stations-Electronic Hot File
(Region use only)
5969 Direct Marketing/Direct Marketers (NEC) 9950 Intra-Company Purchases
6010 Financial Institutions-Manual Cash Disbursements
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MCC Eligibility (cont.)
Discover
All businesses eligible to accept Discover may participate, except merchants with the following
MCCs:







American Express
All Industries eligible to accept American Express may participate, except High Risk
merchants or merchants placed in Amexs Fraud Full Recourse Program. Additionally, the
following MCCs are excluded from the No Signature Program:



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MCC MCC Description MCC MCC Description
4829 Money Transfer Non-Financial Institution 6531
Payment Service Provider Money Transfer for a
Purchase
6010
Member Financial Institution Manual Cash
Disbursements
6532
Payment Service Provider Member Financial Institution
Financial Institution Payment Transaction
6011
Member Financial Institution Automated Cash
Disbursements
6533
Payment Service Provider Merchant Payment
Transaction
6050 Quasi-Cash Member Financial Institution 6534 Money Transfer Member Financial Institution
6051 Quasi-Cash Non-Financial Institution 7995 Betting (e.g., Lottery Tickets, OTB)
MCC MCC Description MCC MCC Description
5542 Automated Fuel Dispensers 7375 Information Retrieval Services
5964 Direct Marketing Catalog Merchants 7393 Protective Agencies & Security Services
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Transaction Criteria
Card Present environment
Card-read
Authorization obtained
Transaction amounts:
Visa
MCC 5310 (Discount Stores) & 5411 (Grocery Stores & Supermarkets) - $50 &
under
Unattended environment - $15 & under
All other eligible face-to-face environment MCCs - $25 & under
MasterCard
Face-to-face merchant-attended terminal transactions - $50 & under
Discover
$50 & under, including applicable taxes, gratuities & cash over
American Express
$50 & under

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Benefits
Faster transaction speed
Cardholder does not need to sign transaction receipt.
Cost-savings
Cardholder does not have to be provided with a copy of the transaction receipt
unless they request one.
Chargeback protection
On transactions that meet Visa VEPS criteria, chargeback protection exists on
reason codes: Illegible Fulfillment (60), Transaction Not Recognized (75) and
Fraud-Card Present Environment (81).
On transactions that meet MC QPS criteria, chargeback protection exists for
fraud dispute reason codes: Requested/Required Information Illegible or Missing
(4802) & No Cardholder Authorization (4837).
On transactions that meet Discover NSR criteria, chargeback protection exists
for the merchants failure to obtain the cardholders signature.
On transactions that meet American Express No Signature criteria, chargeback
protection exists for disputes based solely on the merchants failure to obtain the
cardholders signature at the point of sale.



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Resources
Additional information on certain payment network specific
programs can be found as follows:

http://usa.visa.com/merchants/payment_technologies/veps_faq.html

http://usa.visa.com/download/merchants/veps-for-merchants-us.pdf

http://www.mastercard.us/merchants/quick-payment.html

http://www.mastercard.com/us/merchant/pdf/QPS_Manual.pdf



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