Smart chip technology is rapidly becoming the standard on credit and debit cards issued within the U.S., and it’s having a sweeping impact on businesses of every size. With the latest weapon in the war against consumer fraud, EMV — Europay Mastercard and Visa chip technology, a moniker derived from the companies that created the standard — card information is more secure.
While small and midsized companies that have yet to feel the effects of fraud firsthand may be hesitant to update their merchant services technology and software, experts warn that not making the change increases vulnerability to a breach. As businesses become more secure, those who haven’t implemented EMV cards will more likely be targeted. For example, larger retailers like Wal-Mart and Target have already adopted the technology.
As part of the transition to EMV cards, the liability for breaches or any type of fraud can shift to the merchant (effective Oct. 1, 2015), as opposed to just the card issuer, if they haven’t put in the proper technology.
Smart Business spoke with Bonny Carroll, assistant vice president of cash management, and Ron Schultz, vice president, commercial banking relationship manager, of First Federal Lakewood, about EMV cards.
Why did it take so long for the U.S. to move to EMV cards?
The global switch to EMV cards began in 1994. The U.S. is one of the last to adapt the standard because the amount of networks that need to be converted and updated is extremely complex. Some countries used EMV cards as their first application of cards, while our network had already established the magnetic strip cards.
All U.S. cards will be required to have chip technology by 2017, however, the magnetic strip won’t be entirely abolished.
Is better security the only advantage of chip-embedded cards?
It’s certainly the biggest benefit. Fraudsters are able to obtain data from the magnetic strip and use it to reproduce cards, which isn’t possible with the chip technology.
The switch is estimated to cost between $8 and $12 billion total for the bank card issuers and merchants, but the significant decrease in fraud risk justifies the price tag.
The cards are no longer slid through a card reader; instead you dip the card, similar to some ATMs. The card doesn’t typically leave the cardholder’s presence —another layer of security. For example, at a restaurant, the waiter brings the reader out, versus processing the transaction elsewhere.
Also, the technology used to process cards offers an opportunity to go to different payment methods like mobile payments, Apple Pay, Google Wallet, etc.
If merchants haven’t gotten new processing technology yet, how should they proceed?
Start by contacting your card processor and whoever supplies your equipment. Assess what software is integrated with your current set-up and ask questions.
You can come up with a plan, working with your current vendor, but this is also a good time to do a comprehensive review and shop around. Determine if other vendors offer better packages at a reduced cost.
Your capabilities need to be as flexible and accommodating as possible because payment methods like Apply Pay are becoming more standard. You may want to ask your vendor ‘What updates will you provide regularly as payment types continue to evolve?’
Once you’ve upgraded your processing equipment, don’t forget to communicate the security and flexibility in payment methods to your customers.
What do employers who issue credit cards to employees need to do?
Every card issuer is following a different strategy for converting customer cards. Most aren’t issuing new cards all at once, but when the card expires. If your employees are traveling internationally, it may make sense to request cards early if they are available.
What else do business owners need to know?
Along with discussing this with your card issuer, bank and/or merchant services vendor, you can find information online at creditcard.com or SMBreviews.com.
While most companies are in the midst of their switch, if you didn’t think this applied to you, don’t be discouraged. It’s not too late to begin increasing security for you and your customers with EMV card technology.
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