Do I Really Need New Equipment?
Well, kind of. The card associations saying that anyone who takes credit cards in the USA as a form of payment needs to update their credit card processing equipment in 2015. New equipment must be EMV enabled in order for you to reduce your liability.
That is all of the information most business owners get as far as what is going on with their cash flow. Many business owners hear that it is a “rule” and begin to panic. They scramble to become “compliant” with the new rules and end up spending far more money than necessary. The true story goes much further and is much simpler. When heads that are more logical prevail, this new rule is not nearly as frightening, (or expensive) as it at first appears to be.
What the #>%& is EMV?
EMV is an acronym that stands for Europay, MasterCard and Visa. This is a global standard for the use of integrated circuit payment cards or “chip cards” and IC card capable chip readers that are either inside, or attached to, credit card terminals and automated teller machines, (ATM’s). The EMV rules are applicable only to the card present, (face-to-face) transaction environment. This technology has also made it possible to utilize other instruments of payment such as mobile phones with programs such as Apple Pay and Google Wallet.
For years, EMV payment technology has been the standard worldwide, except in the USA. Virtually all businesses in Canada and Europe use credit card readers that are EMV capable. To put it simply, it is a more secure method of authenticating and completing credit and debit card transactions. It is much more secure than the magnetic strip technology that is widely used in the USA.
What If I Say To Heck With It and Not Upgrade My Equipment?
Possibly nothing. There are no fines and nobody is going to come in to inspect your equipment. However, there are many good reasons to make the change but one of the real dangers to your business is the liability shift that will occur on October 1 this year. Here is a timetable of when liabilities will shift to your business from the banks on fraudulent transactions;
On October 1, 2015: liability for fraudulent transactions will shift from the bank to (ultimately) the merchant on fraudulent sale transactions for Visa, MasterCard, Discover and American Express. (Looks like most of them to me!)
On October 1, 2016: MasterCard liability will shift to the ATM owner for MasterCard transactions.
On October 1, 2017: Visa, MasterCard, American Express and Discover liability shift will occur for pay-at-pump gas stations, as well as for Visa and American Express at ATM’s.
As you can see, the big date for most business owners is October 1, 2015.
So? How Can That Affect Me?
Imagine if you will that October 2015 arrives. You have not updated your card processing equipment. Your current equipment can read the mag strip on the customers’ card but not the embedded chip in cards that have them. You sell $500 worth of goods to a customer and swipe the customers’ magnetic strip credit card through your outdated credit card reader. If the transaction is fraudulent, you are out the $500. You are liable to pay it back. In addition, you are out the cost of the merchandise.
Now imagine that you have updated your equipment to EMV capable terminals. In the same scenario as above, it is the bank and not the business owner that becomes liable for the fraudulent $500 transaction. Even though you used the magnetic strip capability on your updated terminal to swipe the card and complete the transaction, the simple fact that you could have completed the transaction with EMV technology just saved you 500 bucks!
Fraudulent transactions can be due to lost or stolen cards, counterfeit cards or any other reason. It is a sad, but true fact that magnetic strip cards are easily counterfeited once the cardholders’ data is obtained illegally.
I Can’t Afford That Kind Of Loss. What Should I Do?
The bottom line is updating to the new technology payment processing equipment is a wise thing for business owners to do. It is more secure and makes fraud less likely. We are all in this together. Anything any of us can do to prevent fraud and identity theft is a good thing.
The good news is the sky is not falling as some of the banks and credit card sales representatives would have you believe. They simply want to sell equipment and make money. They want business owners to wring their hands, furrow their brows and reach for their checkbook. This is not necessary. If you find the right independent processor this new equipment is provided to business owners free of charge. The time is now to contact a reputable representative and make the switch to 21st century card processing technology. Remember, the liability shift date is October 15 2015. Do it sooner if possible to avoid the last-minute rush.