EMV Chip Cards: What Small Businesses Need to Know
The United States leads the world in many things - including credit card fraud. After the chaos that ensued from data breaches at Target, Neiman Marcus and other big retailers last year, there is finally some good news for consumers, banks and businesses weary from the fight against fraud. Even though most industrialized markets have already done so, the United States is closer than ever to migrating to chip card technology that promises to better protect all parties from the damaging effects of identity theft. As the new technology rolls out, and customers with new expectations roll in, make sure that your business is ready for the switch.
The Technology
The technology, new to the U.S. but not to the world, is called EMV, which stands for its original developers Europay, MasterCard and Visa. Essentially, EMV cards contain a small microchip that stores and protects payment information. The microchip is more secure than a magnetic stripe because it stores the card's sensitive data uniquely after each transaction, making the data much more difficult to lift and counterfeit. Magnetic stripes, which are currently used on U.S. credit cards, only store data one way, making them easy to counterfeit.
Along with the new technology in the credit cards, the switch to EMV will also require new technology in point-of-sale systems. EMV chip cards are not swiped like the magnetic stripe cards. Rather, the customer inserts the card into a slot on the machine and leaves it there until the transaction is complete. Like the current magnetic stripe system though, transactions will require either a signature or a PIN number for authentication.
The Liability Shift
Banks and issuers have already begun to distribute EMV chip cards in the United States. Currently, these cards have both an EMV chip and a magnetic stripe so that they can be used before all merchants have migrated their POS systems. By October 2015, though, most businesses - including small businesses - should plan on having EMV-capable readers. At that time, the liability for credit card fraud will shift from banks and issuers to businesses themselves.
What does the liability shift mean for your small business? If a customer presents an EMV chip card, but your business only has a magnetic stripe reader, you'll be held liable for any fraudulent purchases made with the card. To avoid a potentially costly situation, small business owners will need to migrate their POS systems before the October 2015 deadline.
How to Prepare
Although they bring enhanced security to the global market, EMV chip cards are throwing a wrench into the United States' retail infrastructure. New cards, new machines and new expectations undoubtedly mean new challenges for both banks and merchants. Fortunately, Americans will benefit from the lessons learned by other industrialized nations that have already made the switch.
Small businesses can prepare for EMV technology by migrating to chip card readers at the point of sale. Having the physical hardware in store before the October 2015 deadline will ensure that merchants can learn how to use the new systems and bring their customers the added peace of mind that comes with EMV transactions.
While making the transition, merchants should also focus on customer service. Small businesses are known for their commitment to the customer, but the migration to EMV technology is sure to bring new questions and concerns from customers, and employees should be prepared to handle these situations.
EMV technology promises to restore customers' faith in the American retail market. It's been a long time coming, but now that the transition is finally on its way, small businesses will need to do their part to protect their customers from fraud.
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