By Jesse Meddaugh, Partner
The October 2015 liability shift deadline is here, yet there are still many businesses with questions about this change. Have you upgraded your business to accept chip card transactions? If not, what additional risk is your company taking on?
Businesses that are not currently able to accept chip transactions are now taking on the full liability for card present (swiped) fraud. If you have not updated yet, don’t panic because the majority of chargebacks at most businesses are for other reasons than fraud. In fact, we pulled data from every industry and found that over a yearly period (over $14 billion of transactions analyzed), chargebacks for card present fraud represent only 0.08% of the overall volume. This means, if you process $500,000 in annual credit card sales, on average, you will potentially lose $400 in chargebacks from not having this technology in place.
Your hardware will continue to work and you will continue to get paid, but you want to be aware of certain situations that could come up where your business would take on liability. For example, if a customer disputes any charge for fraud and that transaction was not processed as a chip transaction (swiped via mag strip instead), the business will most likely lose that dispute. The card brands are urging businesses to take the steps necessary to process chip transactions to protect businesses and consumers from card present fraud. This shift will add security, but will also change some of the current procedures in the day to day process of accepting payments.
The transaction process is made more secure by added technology on the chip, but also by the customer not handing over their card anymore. Businesses are supposed to have customer facing hardware for the customer to process the transaction themselves. Companies that are processing on a stand-alone terminal and companies using software or a point of sale system are going to handle this transition differently.
If your company processes payments through a stand alone terminal, hopefully it has been upgraded to be able to read the chips instead of the magnetic strips on customer’s cards. These upgraded terminals will have a slot in the front where a card can be slid in under the key pad. You will also see that there is still a spot to swipe the cards, but using the slot in the front to read the chip is the way to go. The terminal should also be located where it can be turned to face the customer so they can insert the card themselves at time of payment.
If you are processing payments through a software or point of sale system, the main change will be customer facing hardware, which will be similar to most major supermarkets where customers swipe the card themselves and sign digitally on a signature capture pad. This hardware uses semi- integrated technology, which means that no card data ever touches the software. This technology protects your business and the software because hackers or other breaches to your system will not have access to any customer credit card data. It is important to note that keying transactions from phone orders will shift from being keyed into the software directly to being keyed into the actual credit card terminal. During the upgrade process, take into consideration where and how you will want the placement of the new terminals to minimize the difficulty of taking phone orders.
Any changes in business can take a little getting used to, but the changes in acceptance of credit cards will benefit you and your customers with added security. Preventing the growth of fraudulent activity is the main reason the credit card processing industry is adopting EMV (chip) technology. 360 Payment Solutions will continue to take a proactive approach by providing chip enabled terminals, mobile card readers, and integration with software to make sure our clients are protected when accepting credit card payments.
Please remember though that card present fraud impacts businesses minimally and just like we woke up after the Y2K scare, your business is still going to be able to accept credit cards and your terminal is not going to explode.