Sep 18, 2015
Payment card change shifts fraud liability onto merchants

There’s a change coming Oct. 1 that will affect merchants who accept credit card payments – including farm markets and agritourism operations.

The deadline marks a shift by the U.S. payment-card industry to EMV (Europay, MasterCard and Visa), a global standard for microchip-based debit and credit card transactions.

According to Phil Climaco, controller/CIO for Eckert’s, a farm market operation based near St. Louis, the industry’s move to EMV is not a law or mandate but a shift in liability. Merchants are not required to make any changes. After Oct. 1, however, if a customer presents a chip-enabled payment card and a merchant processes it via the card’s magnetic stripe, and the transaction is then determined to be fraudulent, the merchant will become responsible for that transaction.

After the deadline, card-issuing banks will still absorb the cost of fraudulent transactions if a card only has the magnetic stripe, so the shift will encourage them to issue chip-enabled cards as soon as possible, Climaco said.

Merchants will have to decide if a move to EMV-compliant technology is worth the cost. According to DCRS Solutions, a point-of-sale (POS) technology provider, merchants who regularly experience charge-backs or fraudulent card use may want to upgrade to EMV sooner, while those that don’t experience in-store fraud or disputed transactions might do better to wait until their next POS upgrade – if they move to EMV at all.

Climaco said there are positives and negatives to the EMV shift. On the positive side is a hopeful drop in fraudulent transactions. On the negative side, however is the fact that EMV only addresses “card present” transactions, which might encourage fraud to move online. Also, processing an EMV card is slower, which could lengthen store lines.

Climaco estimated that complying with EMV would cost Eckert’s store between $10,000 and $15,000. He said EMV machines that comply with the store’s POS provider and credit card processor cost about $950 each. In addition, the POS software needs to be upgraded to accept EMV transactions.

He also said Eckert’s would not be compliant until after Nov. 1, because it doesn’t want to risk changing equipment during the busiest part of the season. The restaurant arm of the business will probably not comply anytime soon, because the restaurant industry is still trying to resolve specific EMV issues.

Steps to take if considering compliance

Nicole Leinbach Reyhle, publisher of Retail Minded, had this advice for merchants considering EMV compliance.

Reach out to your existing POS provider to see if it is prepared to help you make necessary changes. If it does not have a plan in place, shopping for a new POS company might be a good idea.
Identify EMV-compliant hardware that you will need to process credit card transactions. This will vary based on the POS provider you use. Additionally, identify what expenses may be involved in these new hardware updates.
Create a checklist unique to your store, POS provider and hardware updates to ensure you stay on track. This may include scheduling calls with your POS company, removing old credit card processing hardware, updating with new terminals or hardware and training your team on what they should look for when accepting credit cards.

Matt Milkovich


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