If you are a business owner, you’ve probably heard about the recent liability shift for chip cards. You may be wondering what it means for your business. Are you now required, for instance, to accept chip cards? What risks do you face with the new liability shift? Community Bank of Oak Park River Forest has answers to all of your questions about chip cards and how your business may be impacted.

Q: What is an EMV/chip card?
A: Traditional magnetic-stripe cards are being replaced by EMV, or chip cards. A chip card is a debit or credit card that contains an embedded microchip in addition to the traditional magnetic stripe. Chip cards are extremely secure and greatly reduce the risk of fraud. EMV technology was developed by Europay, MasterCard and Visa, and the technology is used worldwide.

Q: How does the chip card work?
A: The chip uses a process called dynamic authentication. This process generates a unique code for each transaction, meaning that the information is useless to hackers. In addition, the chip performs security checks and validations throughout the transaction process.

Q: Why are issuers switching to chip cards?
A: Security. There has been a proliferation of high profile security breaches at large retailers in recent years, and card fraud is estimated to cost Americans $10 billion this year. Payment networks in Europe, Asia, Latin America and Canada have already made the switch from magnetic-stripe cards to chip cards because of the added security. The United States is the largest user of payment cards in the world, which is why it’s important for the switch to take place.

Q: When does the switch take place, and what does it mean for my business?
A: The liability shift took place October 1, 2015. This places the responsibility for fraudulent transactions on the party with the least secure technology. Essentially, the party that does not support EMV will assume liability for any counterfeit transactions that take place, whether it’s the merchant or the issuer. For example, if your customer has a chip card, but you do not have a chip-enabled terminal, you will be liable for the fraud. Or, if you accept chip cards, and your customer provides you with a traditional magnetic-stripe card, you are not liable.

Q: Am I required to accept chip cards?
A: No. As a merchant you are not required to accept chip cards. However, you are liable for any fraud that may occur if you do not accept chip cards.

Q: What happens if I do not make the switch to chip-enabled terminals?
A: It depends. If you are lucky enough not to encounter any fraud, you are fine. However, should you not switch to chip-enabled terminals, and your customer presents you with a chip card, you will be liable for any fraud that occurs. This could potentially devastate your business.

Q: What risks does my business face if I don’t make the switch?
A: There’s a strong chance hackers will specifically target your business if you do not switch. This is because your customer’s information is more easily accessible when using a magnetic-stripe card, and the hackers know this. Many large and small retailers have already made the switch, which could make you the odd man out, leaving you susceptible to hackers.

Q: What are the added benefits to my business for switching to chip cards?
A: If your business accepts chip cards, you’re making an important statement to your customers that you value their security and well-being. Other businesses that don’t make the switch may become less attractive because customers will know their information may be at risk. By switching, you’re telling customers that your care about their financial security.

Q: How do customers make a purchase with the chip card?
1) They will insert the chip portion of the card into the terminal (found at the bottom of the machine) – called ‘dipping’ – for the duration of the transaction. Removing the card early will terminate the transaction.
2) They then need to follow the prompts on the terminal’s screen. Be patient, the chip card transaction will take slightly longer than the traditional magnetic-stripe transaction.
3) Finally, the customer will provide a signature to complete the purchase.

You will want to train your staff on how to complete a transaction using a chip card so that they can show customers. Soon though, it will become second nature.

Q: How much will the conversion to chip cards cost my business?
A: Think of it this way, if you do not switch to chip-enabled POS terminals, you may cost your business thousands of dollars. The cost of purchasing chip-enabled POS terminals is reasonable, especially when compared to the risks you face if you don’t switch. Most merchant processors provide chip-enabled terminals at a reasonable price and provide solutions for every budget. Begin planning today.