EMV and Other Credit Card Processing Changes Bret Johnson Sr Director of Sales © 2014 Total System Services, Inc. ® All rights reserved worldwide

EMV and Other Credit Card Processing Changes

Bret Johnson Sr Director of Sales

© 2014 Total System Services, Inc.® All rights reserved worldwide.

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 card’s 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; hasn’t 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


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


VISA AIDMasterCard AIDAmerican Express AIDDiscover AIDDiners 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


EMV Deployment Milestones

Key Dates Visa MasterCard DiscoverAmerican 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 ATMLiability 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


Pymnts.com Interview Q & A


2. Many countries have already adopted EMV standards, but is EMV’s 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 EMV’s initial adopters. What’s the significance of EMV in a world that’s 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


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



The Target Breach

Will This Speed Up EMV Adoption?

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.

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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



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


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.


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.


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


Questions


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.


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.


Merchant Additional Fee Programs


January 2014

Click to edit Master title styleAgenda

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Convenience Fees

Special Payment Network Programs

Merchant Surcharging

Programs At-A-Glance

Merchant Surcharging


Click to edit Master title styleMerchant 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 merchant’s 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 merchant’s 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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Click to edit Master title styleMerchant 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.


• 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



Click to edit Master title style

• 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 3rd party service provider

• May be assessed on all cards

• Registration required

Special Payment Network Programs



• 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” ProgramsAugust 2013


Click to edit Master title style“No Signature” Program Rules

• Program Names

• MCC Eligibility

• Transaction Criteria

• Benefits

• Resources


Click to edit Master title styleProgram Names

• Visa– Visa Easy Payment Service (VEPS)

• MasterCard– Quick Payment Service (QPS)

• Discover– “No Signature Required” (NSR) Program

• American Express– “No Signature” Program


Click to edit Master title styleMCC 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.


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 Int’l 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

Click to edit Master title styleMCC 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 Amex’s Fraud Full Recourse Program. Additionally, the following MCCs are excluded from the No Signature Program:



4829 Money Transfer – Non-Financial Institution 6531Payment Service Provider – Money Transfer for a Purchase

6010Member Financial Institution – Manual Cash Disbursements

6532Payment Service Provider – Member Financial Institution Financial Institution Payment Transaction

6011Member Financial Institution – Automated Cash Disbursements

6533Payment 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)


5542 Automated Fuel Dispensers 7375 Information Retrieval Services

5964 Direct Marketing – Catalog Merchants 7393 Protective Agencies & Security Services

Click to edit Master title styleTransaction 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


Click to edit Master title styleBenefits

• 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 merchant’s failure to obtain the cardholder’s signature.

– On transactions that meet American Express No Signature criteria, chargeback protection exists for disputes based solely on the merchant’s failure to obtain the cardholder’s signature at the point of sale.


Click to edit Master title styleResources

• 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


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

Documents

EMV and Other Credit Card Processing Changes Bret Johnson Sr Director of Sales © 2014 Total System Services, Inc. ® All rights reserved worldwide