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Is Your Small Business Ready For A Big Credit Card Change? Is Your Small Business Ready For A Big Credit Card Change?
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Is Your Small Business Ready for a Big Credit Card Change?

Insights & Ideas Team •  February 10, 2015 | Business and Careers

The United States is finally catching up to other countries by adopting widespread use of “chip and PIN” credit cards in 2015. The switch will mean a big change for businesses across the country, as it will require an upgrade to technology, including purchasing new credit card terminals and making software changes. And businesses that don’t make the switch could be at risk.

Chip and PIN cards are different from current credit cards because rather than the current magnetic strip, a microchip holds the card’s data. The new cards encode consumers’ information differently with each transaction, so the data is more secure and harder for a thief to steal.

While the U.S. will begin using chip and PIN technology in cards this year, PINs will not be used immediately, allowing consumers to still use signatures in the short term. Eventually, we’ll all use PINs with our credit cards, similar to how we use debit cards today.

Businesses will need to spend both time and money to make the changes necessary to accommodate the new cards.

Tom Mongoven, a small business owner in Milwaukee, Wisconsin, has already put a great deal of effort into the necessary technology changes at his gas station. He made upgrades at his two registers, several terminals at the pumps outside and the software that supports it all.

“I prefer to be ahead of the game,” he said. “Changes like this one can take time. Each step of the way can bring its own challenges. To upgrade software, my entire computer system had to be down for six hours. That’s a considerable added expense.”

Despite the effort and expense that goes into making the switch, chip and PIN is here to stay. In fact, it has been the standard in Europe and other developed countries for more than a decade. U.S. small businesses that haven’t started the process, as Mongoven has, need to start thinking about transitioning their credit card technology.

In fact, merchants who have not made the switch to chip and PIN by October 1 could face an even greater risk. If credit card fraud occurs at their business after that time and they haven’t made the technology upgrade, the merchant could be liable for those fraudulent charges rather than the credit card company (provided that the credit card company has issued new cards). This is a change from the past, as credit card companies have covered the bulk of fraudulent charges.

How to Make the Switch

If you haven’t made the change already, here are some things to think about:

  • Research options for upgrading current credit card terminals or buying a new system. Because each industry has its own needs and challenges, industry associations may help guide you on the different options available.
  • Learn about incentives provided by credit card companies to make the switch. American Express is offering its smallest merchants (less than $3 million in payment volume on its cards) $100 toward their terminal upgrade. You can apply for this money February—April.
  • Don’t wait until the last minute to prepare for the October 1 deadline. Because there may be several steps to the process, you should ensure you have plenty of time to make the change.

While it is strongly encouraged that businesses make the switch before October 1, not all banks and retailers will be fully transitioned by that time. Therefore, the first round of EMV-issued cards will have both a magnetic strip and chip reader so transactions can still be made.

Looking Forward to Less Fraud

Credit card fraud should be less prevalent in the U.S. with the switch to chip and PIN cards. “Whether it was with carbon or information on the Internet, it has always been a concern that someone could get hold of our consumers’ credit information despite our best efforts to keep it safe,” Mongoven said. “This change will bring another layer of security that should really help.”

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