Much to the relief of consumers and merchants throughout the United States, the October 1st switch from traditional swipe-and-pay credit cards to the new EMV chip credit cards did not beget the zombie apocalypse. Like the once-dreaded Y2K bug, the transition has been little more than a blip on the retail radar. Still, there are some things that you do need to know about EMV chip credit cards, particularly as you head into the holiday season, when people use plastic liberally. Here are the answers to the questions we’ve been hearing.
What in heck is an EMV chip?
EMV stands for Europay, MasterCard, and Visa, the three companies that collaborated to create the new cards. The chip in question is the little metallic square you see on the front of the card. This innovation makes a card harder to counterfeit than the magnetic strip on the backs of older cards. More importantly, whereas the strip contains data that never changes, the data in the chip changes every time it’s used. That means that when large companies are hacked – and it will happen again – the data that hackers acquire will be virtually useless.
Why are we switching?
Because only criminals like fraud. Seriously. That’s the reason. In 2013, the cost of credit card fraud was $7.1 billion in the United States, just over half of global payment card costs. No small potatoes. And while it used to be that the financial institutions backing the cards were liable for the fraud, the change means that the liability passes to you, the merchant. More on that below.
Is it really more secure?
Yes. Counterfeiting has dropped dramatically among countries that have adopted the chip. There are limitations to the security measures, of course, but when used widely by both consumers and merchants, EMV chips should significantly reduce the costs of payment card fraud.
What does it mean for me?
The good news:
Switching minimizes your liability. If you haven’t upgraded your point-of-sale equipment to accommodate EMV chip cards, you, not the bank, are responsible for any fraudulent charges.
It makes you less of a target. Quite simply, the longer you wait to update, the bigger a temptation you are for fraudsters. They’ll avoid the jeweler down the street who’s made the change and zero in on you.
It increases the likelihood of making sales in three ways: First, given a choice between retailers, consumers will likely pick the one whose point-of-sale system keeps them safer. I know I certainly would. Second, it makes it easier for international visitors to transact business with you since all the other G20 countries are already using this technology. (Likewise, when you travel overseas, you’ll have an easier time, too.) Finally, many EMV card readers can accept near-field communication (NFC) contactless payments, making it easier for your customers to pay for their purchases with their smartphones. And since Millennials rely heavily on those little buggers, it’s to your advantage to cater to them.
The less-than-good news:
You’re going to have to train your staff on how to use the new equipment. They, in turn, will have to instruct your customers. Remember, this isn’t a traditional magnetic stripe you swipe in a payment terminal. With the chip, you effectively “dip” the card into the bottom of the terminal.
It means, too, that you will have to shell out some cash (or plastic) to make the transition. New payment terminals will cost you between $300 – $600 per device. That’s not insignificant for most small businesses, especially those with multiple terminals. Is it worth it?
Cost-benefit analysis: For me, decreased liability risk and increased sales potential outweigh the learning curve and cost of equipment. You, though, have to make that decision for yourself.
Okay, I want one. What do I need to do now?
If you haven’t already purchased a new point-of-sale system or adapted the one you already have, you’re in good company. According to a Wells Fargo survey from August of this year, approximately half of business owners aren’t even aware of the change. Unfortunately, that doesn’t indemnify you or them against liability for fraud. Now’s the time to do your research.
Before you take the leap and purchase a new system, I strongly recommend you read Intuit’s “Step-by-Step Guide to EMV Migration for Small Businesses.” In an easy-to-read article, author Fred Badlissi covers everything from auditing your current hardware to buying new hardware to training your employees. It really doesn’t get more comprehensive than this. And it’s simple enough that even this Luddite English teacher can understand it.
You’re a retailer, so change is nothing new to you. You’ll weather this new challenge just fine.
Have you made the switch yet? How was the experience? Are you planning to do it soon? Let us know your thoughts! Share them in the comments section.