News of a big switch in the US Credit Card industry started become front page last year when it was announced that chip cards were finally coming the US market. These microchip enabled cards have been the standard in other parts of the world for quite a while, but the US was slow to catch on. Now the major credit card issuers are putting new rules into effect that require merchants (that’s you business owners) to upgrade to chip card terminals. Thursday October 1st is when these new rules officially go into effect.
Here’s the basics on what EMV is and how it may affect you
What is EMV and chip card?
EMV stands for Europay, MasterCard, Visa, which are the three major global credit card issuers. They are the ones that pushed the switch from standard magnet strips to chip cards. A chip card is literally a credit card (or debit card) that has a micro chip embedded into it, in addition to the regular mag strip. The new technology significantly reduces fraud risk because instead of one code programmed onto the mag strip, the new micro chip generates a unique code each time your pay with your card.
Credit Card fraud has been on a major uptick the last few years, you may remember a big incident at Target in 2013 with millions of customers card numbers being stolen. That event alone had a huge impact on the decision to move the US to a chip card system and away from mag strips alone.
What does it mean for my business?
If you don’t accept physical credit card swipes then you don’t have to do anything right now. The new chips only increase security on physical swipes. However You may have received a new chip card from your bank in the mail already for your personal and business accounts, make sure to activate it and start using it immediately.
If you currently accept credit card payments in person, then you want to make sure you are in compliance. On October 1st, 2015 if you have not upgraded to a new chip card POS or Card reader then you are carrying a higher risk for fraudulent charges on your customers cards, and will be liable for those charges.
Here’s an example:
Joe steals Jakes’s chip enabled credit card , Joe comes to your shop and buys $500 worth of merchandise and pays by swipe on your old style credit card terminal. Jake discovers a charge on his card that he did not make. He calls his credit card company to report the fraud. You get a letter from the credit card company stating you have to pay the $500 back to Jake.
Here’s another example:
Joe steals Jennie’s chip enabled credit card and comes to your shop and buys $800 worth of merchandise, but you have a new chip card compliant reader. Jennie discovers a charge on her card that she did not make. She calls her credit card company to report the fraud. Because you had all security measures properly in place, the credit card issuer fraud protection cover the $800 and reimburses Jennie. You do not have to payback any money.
What if I use something like Square or PayPal Here on my Phone or Tablet?
Thankfully both Square and PayPal have released chip compliant devices that you can order now. You won’t get one for free like their mag strip readers, but it is a worthwhile investment to avoid the risk of paying out on a fraud claim. IF you use a different card reader I would call that company and see if they have released a complaint device you can get. If they have not, I strongly encourage you to move to a company that does have one available.
Here are links to both Square and PayPal’s EMV device pages:
The Bottom Line
More than your money is on the line with this EMV stuff, your brand is on the line.
“Any company that suffers a breach has a reputational hit that is every bit as costly as the specific dollar amount associated with that breach,” says Rob Bertke, senior vice president of Research and Development at Sage Payment Solutions.
You do not want to become a “risky” business, especially moving into the holiday shopping season. So do everything you can to upgrade and be in compliance for the new EMV regulations.
Do you use a card reader? Have you upgraded? Let me know in the comments below!