Is Your Business Ready for Credit Card Chip Technology?

Beginning October 1, US merchants who accept credit cards must comply with new MasterCard and Visa security practices – or assume liability for fraudulent charges made with new EMV credit cards. Businesses affected by this change include skilled nursing facilities, home care agencies, and other senior care providers that often run high-value transactions. A recent survey of independent businesses found that more than 70% were unaware that this shift is coming. If your business is among them, here’s what you need to know right now.

EMV is designed to prevent card-data theft

EMV (named for Europay, MasterCard, and Visa) is the new point-of-sale and credit-card technology. It has already been implemented by the major card issuers in most other developed countries, and it has sharply reduced the amount of point-of-sale credit card fraud. Security experts say it can also prevent data thefts from less secure magnetic stripe cards, like the breach that affected millions of Target customers.

During an EMV transaction, upgraded terminals read credit cards with a special computer chip in them that encrypts data and verifies the transaction before completion in 3 ways:

• The card is checked electronically to ensure that it’s not counterfeit.
• The user verifies his or her identity by entering a personal identification number.
• The transaction is either authorized or declined based on existing information.

This process keeps customer data secure during checkout and all but eliminates transactions using stolen cards.

Merchants who don’t upgrade to EMV will be liable for fraudulent transactions

Plans to switch American merchants to EMV have been in the works for several years now, although the focus has been on converting major retailers rather than small businesses. However, all businesses face the same risk if they don’t make the switch in time. In effect, merchants who haven’t upgraded to EMV terminals by October 1 of this year will be held liable by the major credit card companies for any fraudulent transactions made with new EMV cards on their old equipment. (EMV credit cards and terminals in the US will be compatible with the older magnetic stripe technology to ease the transition.)

That means if a customer pays for services with a stolen EMV card, the business – rather than the card issuer or the bank – will absorb the cost, if its sales terminal isn’t EMV compatible. Businesses that handle mostly low-value transactions may decide it’s worth the risk to wait. Businesses that process high-value transactions or whose cash flow would be severely hurt by even one fraudulent charge should upgrade as soon as possible. The cost of EMV equipment and software will be a factor for many small businesses in deciding when to make the switch.

Talk to your payment services provider now

If your credit-card payment processing service hasn’t already contacted you about the EMV changeover, it’s time to get in touch with them. Ask about the costs involved, which EMV terminals they support, what the installation timeline is, and whether they can help you set up a trial run with your new equipment and software. The sooner your business converts to EMV technology, the less financial risk you’ll face.

If you’d like to learn more about EMV, check out the Small Business Administration’s video, “EMV 101: What Small Businesses Need to Know About the Switch to Chip Card Technology.”

Casey Kelly-Barton

Casey Kelly-Barton is an Austin-based freelance writer whose childhood was made awesome by her grandmothers, great-grandmother, great-aunts and -uncles, and their friends.