Your Credit Card Machine 5-Week Countdown

27 Aug Your Credit Card Machine 5-Week Countdown

It’s not April 1^st, it’s October 1^st and it’s no joke, just 5 weeks away. All businesses handling credit cards must move to EMV-enabled technology or they will become liable for any fraud taking placing with your card processing system or POS. Hopefully your card processing company or your POS provider has already talked to you and explained what you need to do, but if they haven’t, what do you need to know?

WHY EMV?

EMV is about the credit cards your customers are using. Card companies have been mailing replacement cards to cardholders with an embedded microchip in addition to the traditional magnetic stripe. Most foreign countries in Europe have been using chip cards for years, because this type of card is considered safer than relying on a customer signature. There are three types of card acceptance when the card is physically present: swipe and signature, chip and signature, and chip and PIN. Card security is highest for chip and PIN and lowest for swipe. In the U.S. some swipe transactions don’t even ask for a signature if the dollar amount is under $50.

If you wonder why your card processing fees are so high, it’s because you’re paying for the 1-2% of all transactions that are fraudulent. Like gas prices though, I wouldn’t expect card processing companies to lower your merchant fees because fraud costs go down, though we’d hope they would at least not continue to rise as often.

There are arguments over why banks in America have decided to go to the middle level of security (chip and signature) instead of the highest level (chip and PIN). One of the biggest of them is around hardware, as the customer would need to be able to enter a PIN, and that means putting the hardware within reach of the customer. If your POS is behind the bar out of reach of customers, imagine what this does to your layout if you must use PIN transactions. The same applies for table service, you would need to have hand-held terminals for servers and process the transactions at the table where customers could enter their PIN. It can be done, as it is all over Europe, but it would be a dramatic change for American businesses.

THE COSTS OF NON-COMPLIANCE

So back to the EMV, which stands for Europay, Mastercard, and Visa, the original three members of the consortium that created the card processing standard. Running a chip card is called dipping instead of swiping. It involves leaving the card in the card reader while the transaction is processed instead of just waving it through the reader. This has been known to take several seconds more time than the traditional swipe method of reading the card. It’s an especially important thing to consider for high-volume establishments, as you’re adding time for every customer paying with a chip card.

Not every one of your customers will be using a chip card right away, but you need to train your staff how to run both kinds of transactions, and probably how to explain the difference to customers who ask. Plan your training time now to address the learning curve that will be required to comply with the new technology requirements.

Yes, you could refuse to move to the new technology, but if you’re like the 44% of small businesses who have experienced fraud, you will end up being entirely responsible for all the fraudulent transactions instead of the card company, whether card fraud has ever happened to you before or not.

WHAT STEPS DO YOU NEED TO TAKE TODAY?

If you haven’t talked to your POS provider or company that provides your credit card terminals, call them today. Don’t wait until the end of September. You need to make sure your devices and systems are EMV-enabled now and that you have the correct instructions for how to process the two types of transactions you’ll be running. Train your staff to look for the chip in the card and how to handle the transactions correctly so you don’t add liability for your business. If you have to make a hardware upgrade, make sure you’re not going to need to do it twice, and get equipment that will allow you to do chip and PIN transactions when those become the next standard. Start thinking about an eventual layout change or procedural change you will need to make when customers are eventually required to enter a PIN number for every card transaction at the point of sale.

For more nerdy details about EMV and what is involved in the standard, this Wiki entry explains more.  This whiteboard animation explains how the chip technology improves security.