Technology: Ready or Not, Microchip Card Payment is Here to Stay

If you travel internationally for business or pleasure, you may already know that magnetic strip credit cards are considered something of an anachronism in many other countries. Offering a magnetic strip card when making a purchase in Europe or Canada frequently requires the business owner to take your card and input the data manually, or revert to older technology to process the transaction. The “new” EMV (Europay, MasterCard and Visa) microchip system has been in place for years elsewhere, and as of Oct. 1, major card companies want to make it the standard here.

You have probably already received new cards embedded with a small metallic rectangle. For a consumer, the switch-over is relatively painless, but for companies – especially small businesses – the shift requires an investment in new technology or more financial liability for some fraudulent charges.

Here’s what’s at stake for cardholders and business owners:

Fraudulent Charges

Banks and businesses lost an estimated $16.4 billion worldwide last year due to fraud. The United States – which represents about 21 percent of the world’s volume of transactions – is responsible for almost half of these losses. To force the switch to a more secure system, major card companies gave U.S. companies a deadline to adopt the more secure EMV processing system. Those who don’t make the switch will bear increased risk and be liable for losses that were formerly absorbed by the card issuers. Visa was first to issue the Oct. 1, 2015 deadline four years ago, and other major credit companies quickly followed suite. The deadline is not universally applied – gas stations have been given an additional two years to bring their pay-at-the-pump stalls up to the new standard.

Ready or Not

It’s not your imagination. You haven’t heard much about this issue because few national retailers have EMV-ready terminals ready to go. Mega-merchants like Target and Walmart claim to be ready, but many others are not. Estimates indicate only about 25 percent of all American merchants will be able to process the new EMV cards by the October deadline.

Reality

Industry analysts acknowledge that despite the October upgrade deadline, complete migration to EMV systems will take years. Surveys of the small business sector, in particular, suggest that more than half of business owners are unaware of the approaching deadline and, among those who knew, almost 25 percent did not plan to make changes to meet the October deadline. New hardware is costly, and migrating to a different system has proven more complicated than some business owners expected. In some instances, delay in adopting the EMV payment processing system is due to circumstances beyond the individual retailer’s control. Some can’t act until their providers/suppliers add EMV capabilities. Others might feel the risk of covering possible losses is manageable and preferable compared to the cost and hassle of upgrading their current payment systems.