As I’ve been shopping over the last couple of weeks, I’ve been watching how different businesses are preparing for the switch from magnetic strip credit cards to the chip cards that will be coming soon. It’s been fascinating to me.
After October 1, 2015 (a deadline created by major U.S. credit card issuers), the liability for fraud with card-present transactions will shift from the credit card issuer to whichever party is the least chip card-compliant in a fraudulent transaction.
- If your customers make a purchase with a non-chip card, the financial institution issuing the card is on the hook in the event of fraud.
- If the customer has a chip card and the business either doesn’t have a chip card reader or hasn’t turned on the software, the business is on the hook.
With that in mind, I’ve asked retail stores I’ve recently purchased from, if they are ready for chip cards. The response of my “unscientific” poll divides itself neatly into three groups:
Large national stores for the most part, are either ready or have already begun using chip card technology.
Medium-sized stores and chains, usually have the technology but have not yet turned it on and have not yet trained its employees on how to use it. One medium-sized chain store told me that they have the technology in place but were not going to turn it on. They didn’t like it and would take their chances with fraud.
Small businesses don’t have the chip card readers and don’t know much about them. Many don’t seem concerned about the possibility of fraud. This perplexed me. I guess they won't be until it happens. Hopefully not for a large amount.
To get a better understanding of the new technology, here are 11 facts about chip card terminals:
- The cost can be anywhere between $200 and $1,000 per terminal. There are many variations depending on the size of your business and how much customization you need. A small business with a single terminal can expect to pay between $200 and $375 to upgrade their terminal.
- Chip cards are not swiped. They are inserted into the terminal and must be left there until the transaction is complete.
- Each transaction has its own unique data that can’t be used more than once. This makes any large data breech of major stores useless to the hackers as the information is transaction specific only.
- Retailers will be better able to accommodate foreign tourists. In Europe, for instance, they’ve had chip cards in circulation for years.
- In store transactions are more secure.
- Chip card technology can help avoid fraud related charges to your business.
- Greater convenience to retail customers including foreign tourists and businessmen.
- The terminal must be certified, and that can take up to 8 months.
- Employees must be trained on proper use of the terminals.
- Transaction times can be longer than on swipe terminals.
- Uneducated customers may need additional support while learning how to use their new chip enabled card.
Learn more facts on this infographic from our Merchant Services provider BluePay.
With most large and medium sized businesses on-board with chip card technology, as well as the international marketplace, it is here to stay. As a small business owner, you make the decision whether or not you will convert to the new technology.
But remember, the liability will shift to you if you choose not to use chip card technology. If you are on the fence, speak with your Merchant Services provider to understand the chip technology and your actual cost to convert.
If you have further Merchant Services questions, contact me at email@example.com or call 781-698-2186 and I will get you in contact with the appropriate person to discuss your options.
Phil Purcell, V.P. of Lending. Phil has 27 years of commercial lending experience helping small businesses and investment property owners get off to a successful start. He can answer all your initial questions, help you analyze potential properties and explain the steps you need to take to close the deal on an investment property or other small business.