Swipe-and-sign credit card processing for small businesses is poised to go the way of the dodo. According to Visa, by October 2015, all credit cards must have a Europay, Mastercard, Visa (EMV) chip in place. The EMV chip cards will replace magnetic stripes and will generate a one-time code for each transaction. This unique code uses cryptograms that offer greater protections against potential fraud for both the merchant and the customer, which makes it a win-win scenario for everyone.
EMV chip cards are already widely used throughout Western Europe, Canada and Mexico, with the U.S. starting to catch on to the new technology. Despite the U.S. only accounting for a quarter of the world’s credit card use, more than half of global credit fraud occurs here, according to United Press International. Congress hopes implementing EMV chip cards will go a long way toward reducing the more than 4,900 suspects the Secret Service arrested for fraud losses in the last four years.
How it works
Previously, customers would have to swipe their credit cards through a slot and then either sign or enter a PIN. With the EMV card chip, customers will have two options: the contact-based and contactless transactions. The contact-based transaction requires the customer to dip the card into a slot on a payment terminal, while the contactless option allows the customer to simply wave or tap the card over a terminal. Entering a PIN or signing receipt will still be a part of the verification process.
While this change is not too drastic, merchants and businesses should still take the appropriate time to ensure all employees understand why the transition is taking place and how to accommodate the changes. Businesses operating back-of-store terminals might require staff members change their systems to allow for customers who need to enter PINs. Merchants should contact their transaction process companies to determine equipment pricing.
Most EMV chip cards will also keep the magnetic stripe feature, allowing customers to continue using the cards at businesses that are not equipped with EMV chip card terminals. Merchants are not required to change their current payment processing equipment. However, if at some point after Oct. 1, 2015, a fraudulent transaction occurs involving an EMV debit card at a point-of-sale terminal that does not support EMV chip cards, the merchant assumes financial liability of the damages, Small Business Opportunities reported. On the other hand, if the merchant has a new terminal, but the customer has not been issued an EMV chip card from his or her bank, and a fraudulent transaction takes place, the bank would be financially liable for any damages.
To encourage merchant investments in dual-interface terminals, Visa is providing merchants with U.S. Technology Innovation Program (TIP) intended to help merchants evolve alongside new generations of electronic payment processing. If merchants meet Visa’s criteria for TIP, merchants become eligible to receive benefits.
According to Visa, this criteria includes the merchant having validated PCI Data Security Standard compliance for the past 12 months. Merchants must also confirm they do not store sensitive information such as the full contents of magnetic-stripe, Card Verification Value 2 or PIN data. In addition, fully enabled dual-interface terminals must account for at least 75 percent of the merchant’s total transactions. The final criteria for merchants to qualify for TIP incentives includes the merchant not being in breach of cardholder data.
To full prepare a company for the transfer, small-business owners should form an internal implementation project team . This team can assist with the transition, assess the current merchant environment, build up a chip acceptance knowledge base, conduct a merchant needs analysis and review internal plans before finalizing the company’s EMV implementation decision.
For additional information on the credit card processing transition, contact National Funding for additional merchant services.