October 1st approaches and that means the looming EMV deadline is drawing near. So what does the EMV deadline mean for businesses? We’ll answer the common questions below.
What Is EMV?
EMV stands for Europay, Mastercard, and Visa, and it is a secure payment standard. Basically, pre-EMV credit cards hold unchanging data, which makes them vulnerable to credit card fraud.
Although only 25% of the world’s credit card transactions take place in the United States, almost half of credit card fraud happens in the USA. Wow, right?
The USA is adopting EMV signifcantly later than other countries. I visited a few countries in Europe this summer, and cashiers always searched for an EMV chip on my credit card or tried to use a chip reader to scan it. Once they figured out that it didn’t have a chip, they went ahead and swiped the card using the magnetic strip. However, I had to demonstrate to one cashier how you swipe a credit card.
This isn’t all that surprising since most of Europe has been on the EMV system since the early 2000’s. But this shows you how embraced it is in other countries.
What Does This Mean for Businesses?
The new EMV credit cards have a little chip on the front of the card. You may already have EMV credit cards from your credit card company. As a consumer, you don’t have to worry about EMV. As a merchant, you do.
Credit card companies are telling businesses to upgrade to an EMV compliant point of sale system before October 1st. CreditCards.com states that the average cost for EMV terminals is $500-$1000, although some companies are doing a monthly payment. Cayan, for example, rents their EMV terminals for $19/95/month. For small businesses, these prices are kind of a big deal.
Do Businesses Have to Upgrade?
The simple answer is no. You do not HAVE to. However, if you don’t, you are liable for paying any credit card charge disputes after October 1st. This means that if Sally Smith says that she didn’t buy a pumpkin spice candle at your store on October 17th, you will have to pay for that candle, whether it was a fraudulent charge or not.
Before you go online to purchase an EMV terminal, take this into consideration: how often are your business’s charges disputed and what is the cost of your average transaction? It might not be worth it for you to upgrade if your charges are rarely disputed and your average transaction fee is low.
For example, a business had one credit card charge dispute last year, and the disputed amount was $15. Is it really worth it for them to pay $500+ to upgrade their terminal?
Additionally, small businesses are not the primary target for credit card fraud. An article by ZDNet quotes Stephanie Ericksen, vice president of Risk Products for Visa. She says, “The dimensioning of fraud is low in small merchants. We see fraud primarily in electronics and luxury goods retailers — that’s where a criminal would go to find card data they can resell for cash or trade on the black market. But small merchants who tend to have repeat customers and small value tickets, they aren’t really a target for counterfeit fraud.”
Furthermore, having an EMV compliant terminal will not stop fraud from card-not-present transactions, which are purchases made through the internet or phone. So if customers purchase your products through an online cart, or you take payment information over the phone, then getting an EMV terminal will make no difference for you.
For those who have a physical store that accepts credit, you are taking a risk by not upgrading. When someone steals another person’s credit card info, they are unlikely to merely buy a $10 item. Since they’re spending someone else’s money, they could rack up a bill of a few hundred or a few thousand dollars without blinking.
What Should You Do?
If you have a physical store, it can be a difficult decision. Because, while you may not be affected if you don’t, it could be bad if a credit card dispute happens. Here’s the takeaway though, if you’re realizing that the October 1st deadline is a few days away and you haven’t upgraded yet, I wouldn’t panic. If you don’t often face charge disputes, it’s unlikely you will next week.
I would go out and explore your options. There are quite a few companies offering great deals on EMV terminals, so if you’ve decided to purchase a new terminal, you don’t have to buy the first one you find. And if your business is a dry cleaner, lets say, you have a much lower chance of getting backlash from not upgrading, because no one really uses stolen credit card data at the dry cleaners, and if they do, the $15 bill won’t kill you.
If you only accept online purchases or take billing information over the phone, then you don’t need to worry about purchasing an EMV compliant terminal. EMV terminals add security for credit-card-present transactions only.