Q: Do I need to accept credit cards with a “chip” at my stores? I’ve been told there will be a deadline to do this. My equipment only accepts the magnetic swipe cards and I don’t see many “chip” cards.
A: Great question—there’s a lot of confusion about this. There’s a big shift in the payment space in the works called EMV (Europay/MasterCard/Visa), and it will be firmly hitting home by October 2015. Commonly known as chip and pin cards, the chip refers to the integrated circuit built into the card, and the pin is familiar ability to input a pin number to secure the transaction. All merchants in the U.S. will have to be very familiar with the impact of chip and pin or face consequences. Let me explain.
Chip and pin is already the standard in Europe and Canada. Magnetic swipe cards, which the majority of Americans carry in their wallets, are easily forged and are the cause of a great deal of fraud. Much of that fraud is absorbed by the banks that issue the credit cards, and they want to reduce that exposure by implementing chip and pin.
Why now, you ask? The more secure EMV technology has had many starts and stops here in the U.S., with many bank card issuers having offered “smart” cards with chip technology, but that’s been a drop in the bucket in terms of acceptance and impact. The issue has been cost: it is very expensive for the banks to change over all the magnetic swipe cards, and upgrade their systems to accept this technology.
All of that is about to change when banks shift the liability in credit card transactions to merchants by October 2015. Yes, you heard that right. If the merchant doesn’t have a chip and pin-capable POS system, the liability of fraudulent credit card transactions will fall firmly on his shoulders. That is the huge lever the banks will use to get merchants to make the necessary investment to purchase EMV-equipped terminals and POS systems.
The banks will still issue cards that have both the magnetic swipe and the embedded chip and pin technology. They don’t want a situation where a transaction cannot be processed if a merchant does not have the EMV equipment. However, if the card is used with the magnetic swipe, the liability will fall on the merchant.
These liability shifts have already taken place all over Europe, so this is nothing new, but it’s now going to have teeth in the U.S. market. Credit card fraud totals $8.6 billion a year so the banks are eager to roll out EMV cards and force merchants to upgrade their systems to accept these cards.
So as stated, October 1, 2015 will be the EMV “D Day” when all merchants that accept credit cards must have the ability to accept EMV cards in the U.S. or they will be liable for fraudulent charges. Since this will require a new investment in hardware (and as frustrating as that might be), it may be a good opportunity to think broadly about your point-of-sale in general and use this as an opportunity to enhance your POS system beyond just becoming EMV compliant.
This can be an opportunity to upgrade outdated retail technology to improve how you engage with customers, track your inventory, improve reporting, run mobile transactions on your sales floor, deliver omni-channel (store and web) integration, address PCI compliance, etc.
If you would like more information on EMV technology, or have any questions related to point-of-sale, you can reach Michael Dattoma at Michael@retailmerchantservices.com.