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The Coming Payment Processing Liability Shift: Are Your Stores Prepared?

For retailers, that sweet, subtle sound of the credit card swipe is like music to the ears.  But what if I told you that, a year from today, that same sound could evoke fear and anxiety? And another year from that, that all-too-familiar sound will be completely obsolete?  Chances are, this news would come as a surprise to you.  But for most retailers, this exact scenario will become a reality.  Enter: the Payment Processing Liability Shift.

Today, when fraudulent activity is discovered on a credit card that has been used in a retail store, the issuing credit card company is automatically deemed liable for its client’s reimbursement.  However, with advancements in payment processing that have proven much more secure in the numerous countries currently using the technology, it has been determined that both the credit card company and the merchant need to be equipped with the most advanced equipment available in order to safeguard their customer’s consumer identity.  Specifically, both the actual credit card and the processing terminal must be equipped to process an EMV payment, which implements a chip reading process, as opposed to the current “swipe and sign” method.

So what does that mean for retailers?  It means that, come October 2015, if stores are not equipped with the EMV certified and enabled credit card terminals, but customers are prepared to pay with EMV-enabled credit cards, that retailer will automatically be deemed liable for any fraudulent activity that may result from transactions that occur via the “swipe and sign” process that took place in their store.

Remember all the stories we have been hearing about data breaches and millions of card numbers being used fraudulently? When those numbers are used for fraudulent purchases, via counterfeit credit cards, retailers will be responsible for the losses, which in many cases will be catastrophic to a small to mid-sized businesses. Consumers are calling their banks and asking for cards that are equipped with EMV chips as a result of these breaches and are no longer feeling safe about using the old fashioned way of swiping, thus limiting or eliminating sales opportunities.

What’s more, there are many retailers out there that have been utilizing terminals that they understand to “accept” EMV-enabled credit cards.  This means, the terminal is equipped to take the chip-embedded card.  However, taking the card and processing the payment are two very different issues.  As one of only a few payment processors currently offering EMV enabled and certified terminals, we’ve been traveling to retail stores in the South Florida area to build awareness of the upcoming liability shift.  We’ve encountered many retailers who were happy to show us their EMV terminals and explain that they were already prepared to process payments in this way.  Unfortunately, every time we opened their terminal, without fail, we had to reveal to them a “gutless” machine.  The terminals they intended to use for EMV processing were not enabled with the necessary connectivity.

Right now, we are exactly one year out from the liability shift.    One full year to change out payment equipment certainly sounds like plenty of time.  But consider this:  Every retailer, wholesaler, service provider, consultant, salon, restaurant, hotel, grocer, trainers, travel agents, the list goes on… must update this process within the year in order to avoid fraud liability.  Consider also the fact that most payment processing companies are not yet prepared to offer the equipment.  It is likely that most businesses will need to change providers, in order to comply, and that those same payment processors are likely initiating hundreds, if not thousands, of new accounts.  And on top of this, consider the fact that this same payment processor is contacted by a major retail chain who requests they update all of their 1,000+ stores across the country.  Who do you think will take priority for that processor and who will wind up still on the backburner come September 30, 2015? 

Not only will early adoption ensure that you avoid liability and safeguard your customers’ identity, but it may even result in higher profits.  As awareness of this issue grows stronger, so will public sentiment, likely leaving consumers distrusting of “swipe and sign” technology.  Consumers may decide to migrate to EMV before compliance is legally required, resulting in a shrinking consumer base for the noncompliant, and an increase in business for early adaptors.  Many of your customers may be foreign visitors, who have a pocket or purse full of EMV cards, but are unable to use them because the US system of swipe and sign is not secure. Imagine those same customers no longer being restricted because you can accept their cards safely and securely, and they suddenly have access to more money to spend at your location.

This regulatory shift may be surprising news, but it doesn’t have to negatively impact your business. Start to research your options, call your current payment processor, or decide if you need to find a new provider.  EMV compliance may be a choice, but can you afford not to migrate? Would your business survive it?  Will your customers demand it?  Now is the time to decide.

Sam Zietz, Founder and CEO of Touchsuite, a company focused on the payment processing space.  Its sales infrastructure provides merchants and agents with a 24/7 support system and ensures a positive user experience.