Toast EMV in 2015: How Restaurants Can Prepare for the New Chip-and-Pin Standard
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EMV in 2015:
How Restaurants Can Prepare for
the New Chip-and-Pin Standard
For more than 40 years, merchants and consumers have used magnetic stripe
credit cards and compatible payment terminals to complete card transactions. In
2015, commerce in the United States will undergo the most dramatic transformation
in decades as the U.S. begins the process of adopting EMV (Europay, Visa, and
MasterCard) credit and debit card security standards. The adoption of EMV
Table of specifications will require credit card issuers to stop offering magnetic stripe cards,
replacing them with EMV ‘chip cards’ -- credit and debit cards with embedded
Contents microprocessor chips.
The transition to EMV standards will pose a number of challenges to the way
restaurants (and nearly all other business types) have traditionally operated. Anyone
who is not prepared for the adoption of EMV regulations in 2015 will risk exposing
themselves, and their businesses, to potentially crippling consequences. In order
Section 1: What is EMV? ........................................................ 3 to protect their establishments, restaurant owners need to be informed about the
Section 2: How does EMV work? ......................................... 4 imminent changes and start preparing for the new payment environment before it’s
too late. This ebook is designed to help you understand what the adoption of EMV
Section 3: EMV in the U.S. ..................................................... 6
will mean for your restaurant and provide you with the information that you need to
Section 4: The October Deadline ........................................ 8
set your business up for success in 2015 and beyond.
Section 5: The Benefits of Being EMV Compliant ............. 9
Section 6: The Future Implications of EMV Adoption .... 11
Section 7: Preparing for the Liability Shift & EMV .......... 13
Page 2
1 EMV is an acronym that stands for Europay, MasterCard, and Visa, the three
major corporations responsible for creating the new security standard.
2 EMV security standards are a set of global payment specifications that outline
the requirements for transactions between chip-enabled consumer cards and
Section 1: compatible payment terminals.
What is EMV? 3 The EMV security standards are defined and maintained by EMVco, a
corporation created in 1999 by the major credit card companies responsible for
creating the initial EMV specifications. Today, EMVco is made up of the six major
credit card issuers around the world: MasterCard (Europay and MasterCard merged
in 2002), Visa, American Express, Discover, JCB, and UnionPay.
4 For most of the world, EMV is not a new security standard. The first EMV
specifications were published in 1996 and it is estimated that 40% of the world’s
active credit and debit cards and 70% of its payment terminals are already using the
EMV standard (FIS Global).
Page 3
1 EMV requires what are known as integrated circuit cards, commonly referred to
as chip cards or smart cards, and EMV compliant payment hardware to complete
transactions.
Section 2: 2 Chip cards are credit and debit cards with an embedded computer chip. The
How Do EMV chip securely stores data and can communicate encrypted information to
compatible payment terminals to authenticate and verify transactions.
Transactions
Work? 3 EMV transactions require a two-factor authentication process to complete
payments. While the data stored on the embedded microprocessor chip is used to
authenticate the credit card, a pin, or in some cases a signature, is required to
validate the identity of the cardholder. The two-factor authentication adds an
additional layer of security against fraud compared to the swipe-and-sign magnetic
stripe card method we are accustomed to in the U.S.
4 There are two methods for connecting chip cards to payment terminals in
order to complete EMV transactions, known as contact and contactless payments.
Page 44a Contact Payments
Contact payments require physical contact between the chip card
and the payment terminal. This is done through a process referred
to as “card dipping,” in which the chip card is inserted into an EMV
compatible card reader. The terminal and chip are then able to
communicate encrypted data back and forth in order to validate
the card and verify the transaction. If you’ve used a credit card
in Europe recently, you’ve likely already experienced this type of
transaction.
4b Contactless Payments
With contactless payments, no physical contact is required between
the chip card and the payment terminal. Instead, contactless
payments are completed using Near Field Communication (NFC).
When a chip card is placed in close proximity to a NFC scanner, data
is communicated wirelessly between the chip and payment terminal
through radio frequencies.
Page 5The U.S. has been notoriously slow to adopt EMV and has only recently begun
the process of adopting this global payment standard. However, the process will
advance drastically in 2015 as the U.S. looks to join the rest of the world’s major
economies on the EMV standard. Although there have been conversations about US
adoption for several years, merchants should no longer question whether or not the
Section 3: U.S. will convert to EMV; that much is confirmed. Instead, merchants should learn
how the transition to EMV will progress in the U.S. and what implications it will have
EMV in the U.S. on the way they run their businesses.
The process of adopting EMV will advance
drastically in 2015 as the U.S. looks to join the
rest of the world’s major economies on the EMV
standard.
Page 61 On October 17, 2014, President Obama announced a new 3 The major credit card issuers in the U.S., MasterCard, Visa,
initiative called “BuySecure” to help expedite the adoption of EMV American Express, and Discover, in conjunction with lawmakers, have
standards in the United States. The executive order highlights the confirmed that October 1, 2015 will mark the deadline by which all
government’s favorable stance towards the adoption of EMV and merchants in the U.S. (except for fuel dispensers) are expected to have
requires that all newly issued and existing government credit cards be POS systems in place that are capable of enabling EMV transactions.
replaced with EMV chip cards. The BuySecure initiative also mandates
that federal agencies begin upgrading their payment terminals to
enable chip card transactions.
2 In response to the government’s support of EMV and after a year
of devastating credit card hacking incidents, a number of major
retailers have announced that they will begin the process of switching
over to EMV payment terminals by January 2015. Among those who
have pledged to transition are retail giants Target, Home Depot,
Walgreens, and Walmart.
Page 7The October 2015 deadline is significant primarily because it will mark a major
liability shift for merchants in the U.S. Currently, the card issuer is liable for any
losses resulting from credit or debit card fraud. On October 1, 2015, liability will
shift to whichever party, the issuer or the merchant, is least EMV compliant in a
fraudulent transaction.
Section 4:
The October As a restaurant owner or manager, you will not be forced to purchase a new POS
system. However, the shift in liability means that while you aren’t required to update
2015 Deadline to an EMV compliant POS system, if you do not update by October 1st, you are
vulnerable to potentially crippling penalties if a fraudulent charge occurs at your
establishment. For instance, if a guest pays with an EMV chip card, and you do not
have an EMV compatible system in place, and fraud occurs, you will be liable for all
resulting losses.
On October 1, 2015, liability will shift to whichever
party, the issuer or the merchant, is least EMV
compliant in a fraudulent transaction.
Page 8While the adoption of EMV requires some extra time and effort, there are a number
of significant merchant benefits that result from upgrading to an EMV compliant
POS system.
Section 5: 1 Liability Protection
6 Benefits The first and most obvious benefit of switching to an EMV compatible POS system
for restaurant owners is, of course, protection from fraud liability as a result of a
of Being EMV transaction at your restaurant.
Compliant
2 Accept Guests’ Primary Payment Method
By the time the October 2015 deadline arrives, industry experts expect that at
least 70 percent of active U.S. cards will have EMV chips. While the decision to
accept EMV payments will ultimately be at the merchant’s discretion, customers will
not have the option to select magnetic stripe cards after October 2015. This means
that guests will inevitably use EMV cards as one of their primary payment methods.
By acquiring a solution that accepts EMV transactions, restaurants will be able to
better accommodate guests and meet their expectations.
Page 93 Fraud Protection 5 Fewer Chargebacks
The two-factor pin-and-chip (or signature) authentication process The two-factor authentication method and the ability to verify
required to complete EMV transactions adds an extra layer of payments locally using EMV compliant POS systems will likely result in
protection against fraud compared to the swipe-and-sign method. The fewer fraud-related chargebacks for merchants, as the number of lost
embedded chip is used to verify the credit card and a pin or signature and stolen credit cards, and the prevalence of skimming decline.
is used to confirm the identity of the cardholder. This extra layer of
authentication makes it more difficult for criminals to use counterfeit 6 Opportunity to Improve Your Business
and stolen credits. This not only protects restaurant guests, but also If you learn that you’ll be required to pay your POS vendor to upgrade
reduces headaches for restaurant owners and managers. existing software, or if you have to purchase a new system altogether,
it’s probably time to update your system anyway. View these
4 Local Transaction Verification changes as an opportunity to introduce modern technology into your
With magnetic stripe cards, payments have to be sent out to the credit establishment that can improve operations, cut costs in the long-term,
card processor for validation. EMV transactions, on the other hand, and increase revenue with a more optimized system.
can be approved locally through the EMV devices, thus ensuring that
a payment is legitimate at the time of the transaction. The ability to
validate cards locally can also speed up the payment process, making
it possible for restaurants to serve more guests during their busiest By the time the October 2015 deadline
hours. arrives, industry experts expect that at
least 70% of active U.S. cards will have
EMV chips.
Page 101 Prioritization of Newer POS Technologies
Restaurant owners are looking to modern POS systems that utilize newer
technologies to enable greater functionality in preparation for EMV. In a recent study
by Hospitality Technology, restaurant executives ranked cloud-based POS, tablet-
Section 6: based POS software, and POS that is priced on a software-as-a-service (SaaS) model
The Future among the top things they will look for in their next POS upgrade.
Implications of These functionalities allow for a more flexible POS experience. Cloud and tablet-
EMV Adoption based systems create a more mobile POS experience that is not tied to a back office
server. They also allow for easier and more regular system updates as new releases
can be downloaded to all connected devices remotely, allowing them to adapt to
new requirements, like EMV, far more seamlessly than the traditional systems. SaaS
POS systems provide restaurant owners peace of mind in knowing that they will not
be trapped in a long term contract or commitment with their POS provider. As the
US continues its transition to EMV standards, restaurant owners will likely continue
to prioritize modern POS systems that utilize newer technologies to offer enable
greater flexibility.
Page 112 Pay at the table 3 Mobile payments
Looking ahead, don’t be surprised if the United States mandates that The adoption of EMV will create a market for mobile payments. The
merchants complete transactions without removing cards from the microprocessor chip embedded in EMV cards can also be embedded in
cardholder’s sight. This regulation is already in effect in some parts of smartphones and wearable technologies like Apple Watch and Pebble.
Europe, where they have been using EMV specifications for years.
EMV compliant POS systems present major growth opportunities for
For full service restaurants and nightclubs, such a regulation could mobile wallets and mobile payment options. These mobile payments
pose a serious threat to everyday operations. During your research can be completed using the same NFC technology that is used to
into modern and EMV compliant POS systems, consider a POS system facilitate contactless chip card transactions. Industry experts predict
that offers handheld tablets if that mandate poses a threat to your that in 2016, near field communications (NFC) or other contactless
business. Look for software capable of completing transactions table technology will be used by 36.2 million U.S. consumers and, by 2017,
side, without taking the card to a central POS terminal. mobile payments will have a transaction value of 64 billion dollars.
Page 12The first step in preparing for the 2015 liability shift is evaluating the system that you
are currently using at your restaurant. Try to get a sense of what you will need to do
in order to implement a system that is EMV compliant before the October deadline.
Section 7: For restaurant owners, this means that it’s time to start researching the various
Preparing for the solutions available to you, if you haven’t already, so you can ensure that you have
EMV compliant technology before the deadline arrives.
EMV and the
Liability Shift
Page 131 Evaluate your Existing System’s Plan for EMV Below are examples of the types of questions
If your restaurant already uses a point of sale (POS) system, you should you should ask your POS provider:
start by talking with your POS provider about how they plan to adapt • Will I be responsible for ordering new hardware?
their hardware and software to meet the new EMV requirements. What specifically will I need?
Your POS vendor should be knowledgeable about EMV and they
• Will I need any software upgrades?
should already be preparing to roll out the software updates and
• What is it going to cost to upgrade my system so it is
new hardware required to ensure that their customers will be able to
EMV compliant?
support chip-and-pin by the October deadline. Once you are confident
that your POS provider is prepared for EMV, make sure to get a sense of • Am I going to need to have an IT person on-site to install
what you will need to do to get an EMV compliant system in place. or implement anything?
• What exactly will be required on my end once I have
the appropriate software and hardware?
• How much training will my staff need in order to a new
process for completing chip-and-pin transactions?
Page 142 Evaluate if You Should Change Your Technology 3 Select a POS System Geared for the Future
If your establishment uses a system that stores information in a back- Until now, all POS systems and card readers have been designed for
office server/computer, there will likely be a significant cost associated magnetic stripe credit cards. The switch to the EMV security standard
with upgrading both the hardware and software required to accept in the U.S. will be a momentous shift for credit card processors, POS
EMV payments. The legacy POS technology in general is poorly suited vendors and merchants alike. The October 2015 liability shift will
for this new chip card landscape as software upgrades cannot be inevitably be the first of many new regulations that pose serious
released and downloaded remotely. If you haven’t already done so, challenges to the way merchants have operated historically.
spend some time researching cloud-based POS solutions. Switching to
a new POS provider and system altogether could be significantly less Be diligent in the research process so you do not purchase a new
expensive and more beneficial long-term than making the necessary system only to discover that it is not prepared to meet future EMV
upgrades with your currently legacy POS vendor. mandate. Take your time as you read about the various systems
available to you and do not select a POS provider that cannot give
you a clear explanation of how they are prepared to meet EMV
specifications for the October 2015 deadline and beyond.
Page 15What is Toast?
Toast is an all-in-one point of sale and restaurant management system.
Built specifically for restaurants on an affordable cloud-based platform,
Toast offers advanced functionality including tableside ordering, quick
menu modifications, real-time enterprise reporting, online ordering,
and labor management on an easy-to-use interface. Toast’s full-featured
POS platform is used nationwide by restaurants, cafes, nightclubs, and
enterprise franchises.
Learn more at www.toasttab.com
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