Over the past couple years, many American shoppers have grown accustomed to inserting an EMV card (also known as a “chip card“) into a card reader when it’s time to pay. But they don’t have that option everywhere, as studies show a number of businesses still haven’t introduced chip readers. And that may be putting companies and consumers at risk.
Here’s what small-business owners should know about EMV technology.
EMV stands for Europay, MasterCard and Visa, which are the three companies that originally developed the standard. EMV credit and debit cards include a small computerized chip embedded in the plastic. Unlike cards processed by swiping a magnetic strip, these chip cards encrypt data by creating a code that is unique to each transaction. This typically makes it harder for thieves to steal the data and copy it onto a counterfeit card, according to the U.S. Small Business Administration (SBA).
The United States began transitioning to EMV cards in 2012 in an effort to help reduce counterfeit card fraud, according to the U.S. Payments Forum. By the end of 2016, chip-enabled U.S. merchants had seen a 52 percent drop in counterfeit fraud compared to a year earlier, Visa reported.
Still, despite the potential to reduce fraud, only 44 percent of U.S. businesses have the technology in place to accept EMV payments as of September 2016, according to The Strawhecker Group.
There are no penalties or fines for not adopting EMV. But as of October 2015, businesses are held responsible for fraud that happens when they accept payment from an EMV-enabled card that is swiped using the magnetic strip instead of inserting the chip, according to the SBA. (In the past, the financial responsibility typically fell to the bank or credit card company.) That means a business may have to cover losses resulting from the use of a counterfeit, lost or stolen card.
Business owners may be able to avoid the financial consequences of this liability shift by installing EMV payment terminals and using them properly. And they may not need to worry that customers will reject the new system. Seventy-eight percent of American adults say they feel positive about EMV chip cards, and it’s the most preferred in-person method of paying for merchandise, according to a NerdWallet study.
Once you’re ready to switch to EMV, talk to the companies involved in your business’s payments system. This may include your bank, payments processor and point-of-sale provider, according to NerdWallet. Determine what technology upgrades are needed for a smooth transition and establish a timeline and budget for the change.
Most small businesses will pay between $150 and $600 for a new payment terminal, The Denver Post reports, but those using mobile payment systems like Square may be able to buy a chip-card reader for less.
However, implementing chip cards doesn’t stop with the technology, the Smart Card Alliance notes. Once your business has an EMV-compatible payment terminal, it’s important to educate your employees and customers about using the chip to complete transactions and comply with regulations.
If you still haven’t adopted EMV technology, your customers may be more vulnerable to fraud — and your small business may face financial risks.