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Credit card chip and PIN adoption to change consumer, business practices

chip and PIN reader
Courtesy photo
/
blox.nxp.com

Changes are coming to the way debit and credit cards are processed - for consumers, and for business.

It's known as the chip and PIN, chip and signature or EMV method – an acronym for Europay, Visa and Mastercard.

It’s a shift in security standards for how credit or debit card payments are processed, and it means the days of swiping your card are numbered.

Keith Brophy is the state director of the Michigan Small Business Development Center.

“It’s actually been heavily used in Europe and many parts of the world for quite some time - the U.S. has been a slow adopter," he says. "Consequently, the rate of credit card fraud is higher in the U.S. than anywhere else in the developed world.” 

Brophy says you can think of the chip as an extra level of protection, or a built-in control mechanism. 

“The card, through the chip, actually registers the interaction right on the card," he says. "And there’s a significant challenge to duplicate that interaction with counterfeit cards.”

The new technology comes with a new way of doing things – and in this particular case, a shift in liability. 

Visa chip and PIN
Credit visa.com
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Visa chip and PIN (EMV) card example.

Currently, banks and credit card companies are liable or financially responsible for cases of customer fraud.

In October, that liability shifts to the merchant – if that merchant hasn’t yet installed a new machine to process chip and PIN payments. 

Brophy says a survey earlier this summer showed only 42 percent of small businesses at that time planned to implement the new technology.

“A lot of small business may be simply unaware of the October deadline," he says. "They don’t realize that fraud liability’s about to shift to them if they haven’t moved to the new technology. That’s a significant challenge.”

Brophy adds the new rules have some exemptions –gas station aren’t required to have chip and PIN at the pump, for example, until 2017.

He says there’s been a gradual rollout of chip and PIN cards by the banks and credit card companies, generally as new or replacement cards go out. It’s likely you already have at least one in your wallet – and if you don’t, you will soon.

At the end of the day, Brophy says the goal of EMV - or chip and PIN - is safer transactions and less fraudulent activity.

For business owners, that means an up-front financial investment, in order to protect against future fraud liability.

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