As Americans purchasing methods continue to evolve, small business owners need to anticipate these changes so they can take the necessary steps to pivot and accommodate customers, which can sometimes mean obtaining a working capital loan or leasing equipment. One of the most immediate and noticeable shifts coming in payment methods involves the national shift to the Europay, Mastercard, Visa.
Starting Oct. 1, 2015, businesses that accept point-of-sale credit card payments for purchases will be held liable for any fraudulent transactions that stem from a chip-enabled card using a point-of-sale terminal that is not EMV compliant. One of the biggest factors for this change is due to the increased security offered by EMV cards over traditional magnetic strip cards. EMV cards include a microchip that creates a unique transaction code for each purchase, thereby making it more difficult for cybercriminals to duplicate or forge the code. By providing better security for users, owners who make the transition to EMV-compliant terminals can alleviate any fears of fraudulent activity for both their businesses and their customers when processing credit cards.
Business owners lagging
A recent Wells Fargo/Gallup poll discovered a staggering 68 percent of small business owners were unaware of the pending changes for credit card transactions coming this fall. Part of this lack of awareness comes from the fact that only 35 percent of survey respondents said they accepted POS credit card payments. And while awareness of the shift is higher among businesses that accept credit cards at 49 percent, it still indicates a glaring lack of knowledge about the pending shift and the potential penalties involved.
Furthermore, of the 70 percent of small business owners who are not EMV-compliant but accept credit cards, many are in no hurry to make the transition. Of these businesses, 29 percent said they will make the shift in October, while 34 percent plan on complying at some distant date and 21 percent do not have any plans to make the shift. By not transitioning to EMV-compliant terminals, these owners are putting their companies at risk of falling victim to fraudulent activity, which the business will be responsible for repaying.
Customers unaware of changing trends
In addition, not only are small business owners largely unaware of this shift, but customers too are unfamiliar with the transition. According to an Associated PRess-GfK poll, only 10 percent of Americans have the new chip-enabled credit cards, and of these folks, only 33 percent responded that they’ve actually used the cards as intended.
Since chip-enabled cards will need to be dipped or tapped instead of swiped, small business owners and managers need to ensure their employees are adequately trained so they can inform customers of these changes as well.
Digital wallets not catching on
Some business owners might think they do not need to pay the shift to EMV-compliant POS terminals, since they can make up the slack with other forms of payments. Yet, despite the allure, other forms of consumer payment methods are not catching on as quickly as some forecasters were predicting. For instance, the emergence of new digital payment options, such as Google Wallet and Apple Pay, caused many to speculate that these new payment methods would transform the point of service for customers and businesses alike. These are smartphone apps that connect to a person’s bank account, allowing the customer to merely swipe or tap the smartphone on a POS terminal to conduct the transaction. Many trumpeted these new payment options as death of cash.
However, according to another recent Gallup poll of purchasing patterns, only 13 percent of U.S. adults have a digital wallet on their smartphone. Furthermore, of the 13 percent of Americans who do have the app, only 24 percent have actually used their digital wallet for making a purchase in the past 30 days. Business owners cannot wait for new technology trends to account for a significant amount of payments, which means it only makes sense to transition their current POS system to one that is EMV compliant.
With liability shifting from the issuer to the merchant for fraudulent activity arising from non-EMV-compliant POS terminals, businesses can get hit with some hefty fines if they’re not careful. For small businesses operating on a razor-thin profit margins, any unexpected expense can place a financial burden on the company. Owners need to ensure they have the proper technology for all transactions. Waiting it out and hoping fraud will not happen is not a smart decision to make, as there could be potentially large financial repercussions for these companies.
Although a total overhaul of the POS system can be a costly undertaking, it will safeguard a business in the long run. Owners should consider a small business loan for financial assistance when upgrading their POS systems, if necessary.