On October 1st of this year, Visa, MasterCard, Discover and American Express are changing the way they will respond to certain types of payment fraud. From that point on, if merchants are not accepting EMV chip cards (i.e. they don’t have a terminal capable of processing these payments), then they will be held liable for any card-based fraudulent activity made with EMV chip cards used at their business.
The use of EMV chip cards has been rapidly expanding worldwide. Outside of the U.S., currently 44% of all cards have an EMV chip, and 74% of all credit card terminals are capable of processing EMV chip cards. The goal of October’s credit card fraud liability shift, is to encourage merchants to update their point of sale payment processing systems so that customers can make credit card payments with added security.
In contrast, to the standard magnetic strip cards that do not encrypt payment information, EMV chip cards store payment data on an encrypted computer chip embedded in the card. Instead of swiping a chip card, customers insert the card into a slot and leave it there until the transaction is complete. The encryption makes it much harder for credit card information to be stolen during a transaction and reused by thieves in the future. If a merchant is not yet equipped to accept chip transactions, customers can still use their chip embedded cards by swiping it. But in this case, the customer won’t get any of the new security benefits.
Why Small Business Owners Need to Respond
Many business owners may be tempted to simply ignore the rule change because they think that fraud would never occur at their business. Yet the truth is that many businesses are currently processing fraudulent transactions; they just don’t know it. The majority of the time the fraudulent charges are actually being handled by the banks without the involvement of the merchants themselves. By ignoring the push to upgrade their point of sale payment processing, smaller merchants will be exposing themselves to a potential financial loss. This loss can quickly outweigh any money the merchant was trying to save by not upgrading.
The bottom line is that these changes will come whether or not small business owners are willing to adapt to them right now. But, it definitely pays to respond to them as quickly as possible.