Small Businesses Must Prepare for Chip Cards
2015 has arrived, and that means that the transition to EMV chip cards in the U.S. has already begun. The use of chip card technology promises to make credit and debit card transactions much more secure and will significantly reduce counterfeit fraud. However, this transition has important implications for small businesses, and recent surveys show that many small businesses are unprepared. Here’s a quick rundown of what you need to know as a merchant:
What are Chip Cards?
Over the course of this year, more and more Americans will begin using “EMV chip cards,” credit and debit cards that generate a one-time use code for every transaction, making it virtually impossible to create a counterfeit card. Because of this, the transition to chip cards is expected to significantly reduce fraud.
What does this mean for my business?
Chip cards are not “swiped” like today’s credit and debit cards. Instead, the customer pays by “dipping” the card into a specially-equipped point-of-sale terminal that contains a chip reader.
It is NOT mandatory for retailers to upgrade your point-of-sale terminals to ones capable of reading chip cards—if you do not upgrade, your customers will still be able to swipe their cards at your business as they currently do.
However, starting in October 2015, businesses that don’t accept chip card transactions may be responsible for any resulting counterfeit fraud. One exception to this rule applies to ATMs and automated gas pumps—these terminals will not face this “liability shift” until October 2017.
What actions do I need to take?
There are several things that you should do now to prepare your business for the EMV transition and accompanying liability shift:
- Contact your card processor and/or point-of-sale provider to discuss upgrading to terminals that accept chip cards. If you upgraded your equipment recently, it is possible that your point-of-sale terminals already contain chip readers. If they don’t contain chip readers, you may want to think about upgrading. Although there may be a cost associated with new chip-enabled terminals, by upgrading, you may avoid increased liability for certain types of fraud. This is an important cost-benefit decision that only you can make, and you can make the most informed decision possible by having a conversation with your processor.
- Determine what else your business needs in order to become fully EMV compliant and avoid the increase in fraud liability. For instance, you may also need new point-of-sale software that works with chip cards. Again, contact your card processor and/or point-of-sale provider in order to understand what your business specifically needs.
- Train your employees on chip cards, and be prepared to train your customers. Using a chip card is NOT difficult, but it is different than using a traditional magnetic stripe card. Your customers may have questions about this new technology, so it’s important for you to train your front-line employees to deal with these questions. Make sure that any employee who works at the register understands how to use a chip card and is able to explain to customers that this type of card is more secure than the traditional magnetic stripe card.
For more information on this important topic, check out SCORE’s glossary of payment security terms or use our “Ask an Expert” tool. Be sure to also browse the resources below:
- EMV Chip Technology: What Business Owners Need to Know (Spark Business IQ)
- How Your Small Business Can Prepare for EMV Credit Cards (Nerd Wallet)
- Preparing Your Business for EMV Migration (com)
- Swipes Are Out: EMV Migration (Creditcall)
- Introducing Visa Chip Technology- Confidence in a Smarter World (Visa)
- MasterCard Chip Card Frequently Asked Questions (MasterCard)
Tags: EMV, Payment Technology, Small Business, Transaction Safety