Credit crunch time
Time to upgrade to EMV terminals
The Costco Connection
Costco Services provides payment processing services, including terminals and software, through Elavon, with exclusive rates
for Costco members. Go to Costco.com and
click “Services” or call 1-800-846-7395.
new terminals and a different
By Don Sadler
IF YOUR BUSINESS accepts credit and debit
cards for payment, there is a very important
development that you need to know about.
Starting next month, your business could be
held liable for fraudulent card transactions
conducted in your store if you have not
replaced your old magnetic stripe point of
sale (POS) terminals with new terminals that
are capable of accepting microchip-embed-ded EMV cards.
EMV, which stands for Europay,
MasterCard and Visa, is a new card processing technology that’s replacing the old magnetic stripe technology that has been used to
process credit and debit cards in the U.S. for
more than half a century. Banks are currently
in the process of replacing the estimated 600
million to 800 million magnetic stripe cards
now in circulation with new cards that have
an EMV microchip.
“Continuing to use mag stripes on
credit and debit cards is like using eight-track tape technology in an iPod
world,” says Ian Drysdale, a Costco
member and the executive vice
president of North America
sales and business development
for Elavon, which provides
merchant card processing
services for businesses that
are Costco members.
The new EMV cards that are being
mailed to cardholders also contain a magnetic stripe on the back so they can be read by
merchants that do not yet have EMV-capable
terminals. “Mag stripes will eventually be
phased out, but probably not for at least a
decade or so,” says Drysdale.
Aside from moving credit and debit card
processing into the 21st century, the main
reason for the switch to chip-based cards is to
reduce fraud. “Mag stripe cards are easily
duplicated by thieves, but it’s almost impossible to duplicate a chip-based card,” says
Drysdale. Also, the computer chip assigns a
unique code to each transaction—so even if
the code is stolen, it can’t be used by thieves to
make fraudulent purchases.
Statistics reveal how vulnerable the U.S.
card industry is to fraud. About half of all
credit card fraud worldwide happens
in the U.S., even though only
about a quarter of all
credit card transactions
happen here. Most other
nations have already
migrated to EMV; the
U.S. is the last major
world economy to make
fraud is the most common type
of credit card fraud in the U.S.
Here, thieves load payment information they’ve stolen onto the
magnetic stripes of fake cards and
then use these cards to make fraudulent purchases. The widespread
adoption of EMV is expected to
go a long way toward eliminating counterfeit card-present fraud in the U.S.
In addition to helping
to reduce fraud, upgrad-
ing to new EMV-capable
terminals will offer mer-
chants other benefits.
One of the biggest is the
ability to take advantage
of new payment technol-
ogies, including near-field
communications and con-
tactless transactions. By upgrading their ter-
minals, merchants will be able to accept
emerging payment technologies like Apple
Pay, Samsung Pay and Android Pay.
How the new terminals work
With the new EMV-capable terminals,
customers insert their cards into a special
microchip reader instead of swiping them in
the POS terminal as they have in the past. They
will then either sign their name, a process
referred to as “chip and signature,” or enter a
PIN, a process referred to as “chip and PIN.”
Experts say that chip and signature will likely be
the most common verification and authentication process at new EMV terminals, at least
during the early stages of the EMV migration.
It’s important to note that even if your
POS terminals have EMV capabilities, this
doesn’t necessarily mean your files are automatically set up to accept EMV cards. Talk to
your credit card processor to make sure your
new terminals are ready to accept EMV cards
on October 1.
“We don’t want any of our merchant customers to suffer financial losses due to not having switched to EMV-capable terminals,” says
Drysdale. “Therefore, we encourage all merchants to talk to their card processor right away
about upgrading their terminals if they haven’t
done so yet.”
A merchant’s guide to EMV
Visa has created a comprehensive guide
to help merchants through the EMV conversion process. The Visa U.S. Merchant EMV
Chip Acceptance Readiness Guide details 10
steps merchants should follow as they upgrade
their old POS terminals to new EMV-capable
terminals. Visit usa.visa.com and search “U.S.
Merchant EMV Guide” to find and download
the guide. C
Don Sadler is an Atlanta-based writer
specializing in small business and finance.