As the clock for the EMV fraud liability shift deadline ticks away, will your favorite mom-and-pop shop be ready to process your new chip card?
Odds are, probably not, and new numbers show they’re not likely to be ready any time soon.
The national migration to chip card technology means merchants not only need to invest in new card readers and software that can read both chip and magnetic stripe cards, but also overcome educational hurdles. Several major retailers such as Wal-Mart and Target announced their transition to accept EMV chip-equipped credit cards last year, but smaller merchants have been much slower to become EMV-ready.
An American Express EMV Preparedness Survey of 500 small merchants revealed that 57 percent of small merchants cite the cost of new terminals as the primary reason for their delayed move to EMV compliance and another 38 percent currently don’t have plans in place to make the transition any time soon.
What’s more concerning is the survey also found that nearly half (49 percent) of small retailers weren’t even aware that after October 1 they will shoulder fraudulent transactions costs if they have not upgraded their payment technology.
However, small merchants struggling to make the switch to EMV-compatible technology aren’t without help. Most of the major card issuers have announced incentive plans to ease the financial and educational burden of migrating payment systems.
For example, last week American Express launched its Small Merchant EMV Assistance Program. It allows eligible small merchants — classified as those that have a charge volume of less than $3 million — to request a $100 rebate from American Express after upgrading their point-of-sale terminals to EMV-compliant devices before April 30.
Those small merchants will also have access to EMV educational resources and American Express Fraud Squad contacts in case more assistance is needed to make the transition.
But the new American Express program isn’t the only set of incentives small businesses have at their disposal.
Since October 2013, all American Express merchants have been able to receive financial relief from PCI Data Security Standard requirements if at least 75 percent of their transactions are processed through EMV-compliant point-of-sale terminals.
Visa and MasterCard’s EMV migration relief incentives started back in October 2012, when both networks announced that if 75 percent of merchant transactions originate from EMV-compliant point-of-sale terminals, the merchant may apply for relief of Payment Card Industry audit requirements. In 2013, MasterCard also announced that merchants who once again meet that 75 percent threshold can be relieved of 50 percent of any account data compromise penalties it may receive.
There are also a number of non-financial resources available for retailers that are unsure of how to approach the technology shift. The Retail Solution Providers Association has created a resource page of downloadable files, articles and webinars merchants can access free of charge to learn more about EMV technology and the fraud liability shift deadline.
Small retailers may feel the financial weight of becoming EMV-compliant more than the larger big-box stores, but they also may have more to lose if they don’t prepare now.
Merchants who don’t install EMV-compatible equipment and software before the October 1 deadline will not only be putting themselves at financial risk if they process fraudulent transactions after the deadline, but also risk losing already cautious customers in the wake of the past years’ slew of major data breaches.
“Why would I want to shop at your store and subject myself to the potential headaches and hardships of a fraudulent transaction when I can go to your competitor and shop knowing that my private information is much, much more secure?” Gene Marks wrote in a Forbes column about merchant migration. “This is not just a cost of doing business. This is an investment in customer service.”
More and more consumers are becoming ready to use chip cards, too. An estimated 120 million chip cards were issued by the end of 2014 and that number is projected to reach 600 million by the end of this year, according to EMV Migration Forum.
I know I’d love to keep spending my coffee allowance at small, “hipster” cafes, especially if I know my transaction data is more secure. Once my credit cards are re-issued to me with chips, I’m going to take full advantage of that extra layer of security, and if that means changing my shopping habits to do so, I will. Small retailers, you have 210 days to upgraded your payment systems. You can do this.