If your business accepts credit and debit card payment, integrating chip technology into your point-of-sale (POS) equipment and infrastructure should be a top priority.

Beginning October 1, 2015, if a customer presents a chip-embedded card to you for payment but you have not yet installed an EMV-enabled POS terminal, your business — not the bank — will be on the hook for any credit card fraud loss that occurs with the transaction. This liability shift presents very real risks to retailers that do not make the change.

What Is EMV?

EMV stands for Europay, MasterCard® and Visa® and is a type of card processing technology, new to the U.S., that replaces old magnetic stripe cards with microchip-embedded cards, cutting down on fraud. Instead of swiping their cards at the point of sale, customers will insert them into a card reader that reads the microchip to authenticate and process the transaction.

The U.S. follows Europe, Canada and other developed nations in adopting this technology. However, credit card companies have already begun mailing the new cards to your customers, and they will soon be presenting these cards to pay for goods or services you provide, if they haven’t already. The old cards will still work for a while. But eventually they will be phased out. Indeed, in some countries, if your card doesn’t have the EMV chip already, you can’t use it.

A Powerful Weapon Against Fraud

The move to EMV or smart chip technology is intended to help reduce credit card fraud. After Canada completed migration to EMV in 2009, annual credit card fraud losses dropped from $142 million to $38.5 million in just three years. Other countries have experienced similar reductions in credit card fraud after migrating to EMV, according to the Payment Card Industry (PCI) Security Standards Council.

While EMV technology does not eliminate all credit card risks (for example, it won’t prevent data breaches like recent ones at Target, Home Depot and elsewhere), it does make it harder for criminals to use the data and transfer it onto another card. Counterfeit cards account for 37 percent of credit card fraud in the U.S., according to U.S. government data.

Don’t Get Caught Off Guard

In a recent survey by Software Advice, an information technology research and advisory company, one-quarter of the 160 small and midsize business owners and executives responding to the survey weren’t even aware of the October deadline, and a mere 11 percent were prepared to meet it.

According to the survey, there are numerous reasons for this lag, including expense, lack of dedicated technical staff to effect the change and simple lack of information. Retailers face an $8.6 billion bill to accommodate the new EMV chip-enabled cards, according to a March report issued by Reuters. Some smaller retailers are betting that their risks are small, compared with the expense of converting their terminals, and they’re opting not to upgrade.

However, it is critical that you be fully informed when weighing your own risks. Today’s criminals are always one step ahead of methods developed to stop them, and it only takes one clever crook to jeopardize everything you’ve built.

Also keep in mind that, in addition to its defensive value, upgrading your POS equipment will enable you to take advantage of new payment options made possible by dual-interface EMV-capable terminals, including contact and contactless transactions (tapping or waving the card instead of inserting it into the terminal). 

Get Started Now

Don’t wait until you have a problem to acquire new EMV-enabled terminals for your business. To learn more about how City National can help you prepare for the October 2015 deadline click here, or give us a call at (800) 599-0020.

REMINDER: New technology does not mean that retailers and consumers can relax the commonsense precautions that help them avert credit card fraud. Here are a few:

Retailers: (1) know your client; (2) educate your employees about fraud; (3) make sure your POS equipment is in good working order; (4) compare signatures and ask for ID; (5) don’t accept damaged or unreadable cards; (6) use the address verification system (AVS); (7) keep accurate records of credit card transactions; and (8) when in doubt, call the card issuer.

Consumers: (a) keep your credit cards in a safe, secure location; (2) verify the charge amount before signing a credit card receipt; (3) don’t give out your credit card number over the phone except to someone you have called using one of the phone numbers on the back of your card; (4) don’t click on unsolicited email links and use only secure websites for e-commerce; (5) shred credit card receipts and billing statements after you have reviewed them at the end of the month; and (6) report lost or stolen credit cards immediately.