On Chip-Based (EMV) Credit Cards and Your Auction

31 Jul 2015 By Roger Devine

Executive Summary:

  • Magnetic Stripe Swipers will still work and swiping cards with magstripe readers is still acceptable.
  • There is a no general financial penalty for NOT using a Chip-and-Pin Card Reader.
  • If cardholders enter the data themselves, the new type of card changes nothing.

The Full Explanation:

This October, there will be a change in credit-card processing regulations that has already started to cause some confusion and anxiety among auction chairs. We’d like to lay out what this change does and doesn’t mean for you, for your guests, and for us; and give you a few options on how to approach the change.

The change is a shift in the liability rules that cover fraudulent transactions resulting from the use of counterfeit credit-cards. This shift is tied to the rollout of EMV cards (ones with a microchip on the card themselves), and card-processing equipment that can read those chips (rather than just reading the magnetic-stripe on the back of the card). The reason that this shift is happening is to provide an incentive to the card issuers to send out new EMV-equipped cards, and for merchants to upgrade their card readers.

The way the shift works is this: after October 1, 2015, in any_card-present_ transaction (one where a card is presented to the merchant and run through a card reader), whichever of the two parties listed above (card-issuer or merchant) whose failure to upgrade to EMV technology causes a transaction to not be able to be processed as a “chip-on-chip” transaction will assume greater liability for any fraud occurring, if the card is counterfeit.

And that is all that the change this October is.

How It Affects Your Auction (if you are using our software):

Not much. Your group is a merchant, and so is one of the parties that could see additional liability if one of your guests brings a counterfeit credit-card to your auction, and runs it through one of the magnetic-stripe readers we rent and sell to our customers, and then buys something or makes a donation and pays with it using that counterfeit card.

However, this only covers cards swiped at check-out - card numbers that are vaulted when the guest buys their ticket through the SchoolAuction.net online registration, or card numbers that are entered by the guest using the Advanced Check-In are not subject to this liability shift - should a guest at your auction use a counterfeit card that they entered themselves into your event website, then the liability rules are the same as they are today.

Cards swiped at check-in are a bit of a gray area. Because of current card-industry rules, you are not allowed to store the secret magnetic-stripe data that is only present on the stripe (not printed on the front of the card) when a card is vaulted. So those transactions present to the processor as hand-keyed - they look like eCommerce transactions. Fraudulent transactions from counterfeit cards swiped at check-in would most likely be adjudicated under the current liability regulations (not the new ones coming in October), but we can’t say that for sure.

Things that this shift does NOT do:

  • This change does NOT mean that magnetic-stripe card readers won’t work, or that guest cards will no longer have magnetic stripes. Visa and MasterCard expect the transition to EMV cards to take 5 full years; in the meantime, they will continue to accept transactions from merchants that read the magstripe rather than the chip. So if you own card-readers you got from us, they will continue to work for the near-future.
  • This change does NOT mean that there is any change in liability regarding eCommerce transactions - this includes online ticket sales, online donations, and event-night purchases made on cards that were entered by the guest, using the Advance Check-In feature, or the mobile Self Check-Out feature.

Another thing to consider

EMV card-readers (as far as we know today) will be “locked” to a single merchant account - meaning that our business model of renting them to you for your auction will not work when it comes to that new type of card-reader. If you want to use an EMV card-reader, you will have to purchase it. And to date, we have not seen any that cost less than $500.

So what do we recommend?

Continue to move toward guest-keyed credit-card usage. Encourage your guests to buy their tickets online and store their card number for future use when they do so. Use the Advance Check-In feature, and the Self Check-Out feature to encourage those guests who have not already saved their card number when buying tickets to enter it themselves, from their own computer or phone. As much as possible, move away from the type of check-in where a guest hands their card to a volunteer.

If that is not possible? The magnetic-stripe readers we provide will still work, and you will still be able to accept guest cards using them. If you are concerned with the possibility of your guests presenting counterfeit credit cards at your auction I would then consider asking guests to confirm (or provide) their billing address and zip code at the event when they present their card.

reference: http://usa.visa.com/download/merchants/bulletin-us-participation-liability-shift-080911.pdf

NOTE: This page seems to be getting a lot of general internet traffic. If this is your introduction to our website, we’d like to welcome you! We provide software to school-based and other small non-profit groups to help them run fundraising auctions; there is a lot of information about our software on the site (and you can download an Information Packet to print and share with your auction team here), as well as general advice and resources for the auction chair. Take a look around, and when you’re ready to see if our software can help you, set up a free trial account and test it out for yourself!