Credit cards with that little chip embedded in them. Has your small business made the move to accept them? When credit issuers began augmenting magnetic stripe cards a few years ago, much fuss was made about how they’d protect consumers. But are you aware of how the technology also protects your business?
Although it’s not a legal requirement, the major credit card companies requested that most businesses become compliant with terminals that accept EMV chip card technology for payment processing by October 1, 2015 or be liable for any fraud that might otherwise occur without it. That was over three years ago, and regardless of the fact that nearly half of the businesses in the U.S. still haven’t complied, there are compelling reasons to get on board.
If you haven’t yet, here’s why you should:
First, What EMV Means
EMV is an acronym for Europay, MasterCard and Visa, the companies that originally developed the system. It’s now managed equally by Visa, MasterCard, American Express, JCB (Japan Credit Bureau), China UnionPay and Discover.
Simply put, EMV is the global technical standard for smart debit and credit cards and the ATMs and payment terminals that process them, and it’s regarded as the most effective means of enhancing security on both sides of onsite POS financial transactions. Even though it was introduced relatively recently in the U.S., the technology has been available for over 20 years and is used in much of the rest of the world.
How It Works
The first plastic credit cards that could be used at more than one retailer and paid off in installments were devised back in 1958 by Bank of America. To use them, retailers ran them through a small, manual embossing device that made an imprint of the card on a set of triplicate carbon copies; one copy went to the customer, one to the merchant and one to the financial institution. It’s easy to imagine the many opportunities for fraud with this system.
The first means of credit card security arrived in the 70s with magnetic striping for identity verification, but many cards were still being run through imprint devices and leaving a wake of paper copies. Swiping the cards through electronic terminals finally became standard procedure, but it didn’t eliminate the problem of counterfeiting and it actually added the more serious problem of hacking.
The improvement EMV chip technology has made over mag striping is that it creates a unique code for each transaction that can’t be used again. Because account data is carried in the card’s embedded electronic chip, it’s less likely that the customer’s account information can be stolen from the card itself or from the terminal that is reading it. In addition, a chip card can’t be fraudulently scanned or cloned.
How It Protects Your Business
Before the advent of the chip, the financial institution that issued the card was liable for any counterfeit fraud. If you unknowingly accepted a fraudulent card and it was accepted via the electronic terminal, the card issuer had to absorb the cost and you as the business owner weren’t penalized for any loss.
Since EMV has become available, however, if a customer has a chip card but you don’t have a terminal that can read and transmit it, the cost of any fraudulent transaction is all on you. Your business might not be in the ranks of companies like Target, which lost over $200 million because of a data breach that affected 40 million customers, but your own loss could have expensive consequences.
Why Not Switch Over Now?
So why haven’t you made the move? Despite the fact that the one-time hardware, software and related costs of initiating a point-of-sale EMV system can be substantial, the financial risks can far exceed them. You’re probably not even aware of how much money you might have lost during the years when the credit card issuer was covering it.
It also makes life easier both for you and your customers when you have an EMV system that accommodates Apple Pay and Android Pay mobile purchases, pay-at-table and pay-at-aisle options as well as the RFID (radio-frequency identification) technology that lets them just tap and go.
Until the changeover is complete, POS terminals that read magnetic stripes will be around. But soon enough they, like the card embossing machines, will be obsolete. Why wait?