Beaufort News

Expensive chip-card technology not a top priority for all local businesses

In this file photo from last year, McAllen, Texas, Police Chief Victor Rodriguez points at dozens of fraudulent credit cards that were confiscated after arresting a man and a woman on fraud charges tied to the 2014 credit card breach at Target.
In this file photo from last year, McAllen, Texas, Police Chief Victor Rodriguez points at dozens of fraudulent credit cards that were confiscated after arresting a man and a woman on fraud charges tied to the 2014 credit card breach at Target. AP

Many small Lowcountry businesses are holding off on upgrading to new anti-fraud credit card technology.

That decision comes despite an Oct. 1 deadline from financial institutions requiring all retailers to have EMV, or Europay MasterCard Visa, technology to process chip cards. The chips add an extra level of security that traditional magnetic stripe cards do not have.

But making that transition isn't a priority for all businesses -- especially small, local retailers.

"We're not ready for it," said Kelly Smith, manager of Common Ground in Beaufort. "(The transition is) not in our plan for the next six months."

The coffee shop's position reflects a national reluctance on the part of some business owners to convert to the new technology despite the passing of the liability deadline.

A majority of national retailers have made the switch, but the terminals and associated software can be expensive for small businesses. The average cost to install EMV equipment, which usually requires hiring technology consultants, ranges from the low hundreds to tens of thousands of dollars.

"(Oct. 1) is kind of a soft deadline," said Mike Novitski, director of sales and marketing at Merchant Service Center on Hilton Head Island. "It's going to take a couple of years" to complete the transition.

Novitski said the center has been installing EMV-compliant technology in businesses since May.

"The industry still hasn't figured out how to deal with this," Novitski added. The level of risk by not having the technology varies by business, he said, but "higher-ticket merchants" obviously have more to lose if they don't convert since they will be liable for fraudulent charges made by chip cards that are scanned with outdated technology.

An American Express survey earlier this year found that nearly half of small businesses nationally were unaware of the fraud liability shift in October.

Thirty-eight percent either hadn't decided or did not plan to upgrade to the EMV-enabled systems.

More than half -- 57 percent -- said the cost of new terminals was the primary barrier.

'A NEW WAY OF DOING BUSINESS'

The new cards enhance payment security.

"EMV has been in Europe now for almost seven years," said Drew Posta, business sales consultant at Wells Fargo, who spoke at a Beaufort Regional Chamber of Commerce event last Wednesday. "It already is the global standard. America is trying to catch up quickly."

He said by now, most banks should have issued new credit cards with the chip technology. He said that debit card networks are behind. He estimated about 575 million chip cards will be issued by the end of the year.

Consumers worried about the theft of their credit-card information -- such as in the 2013 Target data breach -- have less to worry about with the new technology, Posta said.

The chip-card technology is much more difficult to counterfeit than standard magnetic stripes because the data cannot be replicated.

"Encryption secures the transaction by converting payment data into a cryptogram," he said.

The cards also contain tokenization, which removes card data from the merchant environment before a hack occurs.

For those businesses that have not converted, the penalties could pile up.

"If you don't have the ability to take an EMV card at your specific business, you are 100 percent liable for any fraudulent transactions," Posta said.

Restaurants in particular are still working out how to navigate the technology.

"A tip would need to be added by the customer before the card is run for payment," he said. This then gives the server insight into the customer's tip before the payment is processed.

"It's been kind of tough; it's a new way of doing business," Posta said.

For consumers who have EMV chip cards and are running into problems at businesses, Posta asked that they be patient.

"This (system) is designed for their safety," he said.

In addition to the chip, the new cards have a magnetic stripe, so they can still be used at non-EMV-compliant terminals.

Additionally, the EMV terminals are designed with an option to swipe credit cards, for customers who have not yet received their chip cards.

Follow reporter Ashley Fahey at twitter.com/IPBG_Ashley.

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