The shift towards chip cards, also known as EMV cards, is under way throughout the U.S.
If your merchant bank hasn’t yet required you to change your card reader to a stripe machine chip reader, it probably will soon. Learn why the change is happening and how your business can benefit from an upgrade.
EMV Versus Stripe Cards
The data stored in the magnetic stripe on a traditional credit or debit card includes only the cardholder’s 16-digit card account number and the card’s expiration date and 3-digit security code (CVC). That’s not a lot of data, and it leaves a lot of room for fraud to occur.
EMV stands for its developers, Europay, MasterCard, and Visa. It is based on technology that embeds microprocessor chips into payment instruments such as credit cards and mobile phones. In addition to the cardholder data that a stripe contains, the chip creates a unique code for every transaction. If the card is stolen, it would be rejected for the next person who tried to replicate the data. EMV technology will not prevent data breeches entirely but it will make it a lot harder for criminals to make a profit from what they are stealing.
Chip cards are quickly becoming the global standard for credit and debit card payments. Most countries in Asia and Europe have completely transitioned to chip cards, making it difficult for criminals to exploit card accounts there. Because it is easier to steal data from magnetic stripe cards, criminals have turned their attention to the U.S., where stripe cards are still in wide use. This has resulted in an increase in card fraud here.
The merchant banks, of course are pushing back, providing a harsh incentive to switch from stripe machines to the new EMV technology. But you should make the switch now, even if your bank doesn’t yet require it. Why? According to Visa.com, “For merchants who have completed the chip upgrade, counterfeit fraud dollars dropped 43% compared to a year earlier.”
What it Means to the Customer
For your customer, conducting a charge or debit transaction is slightly different with a chip card. Instead of swiping the card, he or she inserts it into a terminal slot, a process known as “card dipping.” The customer does not have to worry about swiping the card in the right direction.
Data then flows between the card chip and the financial institution to verify and create the transaction data. It takes a few seconds longer than a swiped transaction, but the extra security benefits outweigh this slight inconvenience.
Chip cards will still have the magnetic stripe during the migration to EMV cards. This will ensure that customers can continue to pay until all merchants have upgraded their equipment.
Benefits for Merchants
There are three reasons for a business to upgrade their business to accept chip cards.
Protection Against Fraud – The main reason to switch to chip cards is to protect yourself against fraud liability.
Previously the payment processor or issuing bank was usually liable if a transaction occurred using a stolen card or stolen data. However, on Oct. 1, 2015, the liability for card-present fraud shifted to whichever party is the least EMV-compliant. That means that if a consumer fraudulently uses a chip card at a store that has not upgraded its system, the cost of the fraud will likely fall on the merchant.
Customer Service – The longevity of a brand or business relies on providing high-quality customer service. Accepting chip cards demonstrates that your business is up to date technologically and is taking proactive measures to combat fraud.
The impression is especially powerful if your business serves customers from overseas. The use of an “antiquated” stripe machine makes a particularly bad impression on customers from Asia and Europe who are used to a more sophisticated and secure transaction.
Stay Ahead of the Curve – The U.S. is the last major market still using the magnetic-stripe card system. As of October, 2016, only 37 percent of U.S. stores were accepting chip cards, according to Visa. Industry experts expect the merchant migration to slowly continue over the next few years. But why be one of the late adopters?
Are going to wait until all your customers and competitors have made the change? Are you going to put it off until your merchant bank starts charging fraudulent transactions to your account? (Believe it: you could pay for the upgrade with what you save by avoiding the charge from a single fraudulent transaction.)
Start planning your upgrades now to keep up with your customers and stay ahead of your competition and the fraudsters.
MAX Payment Solutions offers businesses technology and services to accept credit card payments at affordable rates. Contact us if you have questions about chip cards and how to upgrade.