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The Hairy Woodpecker

Birding Business July 2015 : Here Comes EMV

Here Comes EMV

BY HANK WEBER | Contributing Author

Are you ready?

EMV IS COMING – October 1st is the target date.   Are you ready for it?  Do you even know what it is?  Most small retailers don’t know – yet.  But they will.  It will change Point of Sale (POS) operations in every store in the country.

EMV (which stands for Europe, Master Card and Visa) is a new design for credit cards that has a smart chip embedded in the card in addition to the magnetic stripe.  It is intended to reduce credit card fraud which is currently estimated to be over $8 billion a year in the U.S. 

The magnetic stripe on the back of today’s credit card contains a fixed amount of information such as the customer name and account.  This information on the magnetic stripe does not change.  If criminals get hold of that information, they can create a fake credit card that has the correct information encoded in the magnetic stripe.  And they can use that card over and over.

The new EMV cards with the embedded chip create a unique, one-time code for every transaction that can never be used again.  Even in the event of a major security breach where hackers break into a bank’s system and steal thousands of credit card numbers, any fraudulent card will be easily detected.

Eliminating fraud sounds like a laudable goal.  But like most plans the devil is in the details.  Your current credit authorization terminal probably will not be able to interact with the new embedded chip cards.  You do not read the embedded chip by swiping it.  You insert or “dip” an EMV card into a slot and wait momentarily as the transaction is processed.   Some new authorization terminals may also incorporate “near field communications (NFC)” that allows the user to merely tap the card on the terminal or wave it nearby.  The mechanical design of some newer credit terminals will allow either type of card to be read.  Just be sure the processing software is set up to accept a new EMV card.  Either way it means you may need a new credit authorization device or updated software.

Fortunately the first round of new EMV credit cards to be issued will have both the traditional magnetic stripe as well as an embedded chip.  That means you can continue to “swipe” cards in your existing credit authorization device in order to authorize a credit card payment.  But the banks, credit and payment processing companies want to force everyone to switch and use an authorization terminal device that reads the new chip card.  

They want to strongly encourage retailers to adapt to the new technology.  It may cost you something but it will eliminate a lot of fraud that they now absorb.  As an “incentive” for you to switch, they will be adopting a new policy in October 2015 that some merchants have dubbed “Liability Switching.”  Basically this new policy makes you, the merchant, responsible for any fraudulent card transaction unless you use an authorization terminal that handles EMV cards.  If you swipe the mag stripe of an EMV card for authorization and it turns out to be a fraudulent card, you, not the credit company, are financially liable.  It is your problem.

The US is the last major country to adopt EMV cards.  It will take time to phase out all the older cards, but it will happen.  An estimated 120 million EMV cards have already been distributed to card holders and by the end of 2015 more than 600 million cards are expected to be in circulation which represents 70% of all credit cards and 40% of debit cards.  You may have seen some of them already.  And you will definitely see more in the near future.   

So what should you do?  Should you rush out and buy or lease a new authorization device? 

The situation may be different for every store.  At a minimum, you should contact your payment processing and authorization company and discuss their plans for accepting EMV cards and what options are available to you.  Find out if you need a new terminal or updated software for your current terminal.  And expect that the number of unsolicited phone calls from other credit processing companies claiming to save you substantial money will increase.  Just be aware that those industry sales reps and tactics tend to be considered on a par with used car salesmen.  Get the facts.

I have never had a problem with a fraudulent credit card.  I also take personal checks without problems.  In fact, I often boast that I have the most honest customers.  I’m glad I don’t run a drug store or other store that attracts all segments of the population. People who love birds and nature are just good people, the salt of the earth.  I could probably continue just to swipe mag stripes and never have a problem with a fraudulent card.

However, I would hate to sell an expensive pair of binoculars and swipe an EMV card only to discover later that it was fraudulent.  Moreover, fraud experts anticipate that fraudsters will avoid merchants that are using new EMV terminals and will focus on those that haven’t upgraded.

It is time to find out what EMV will mean to you.  October isn’t far away.