A change in credit-card processing is causing a commotion for retailers, creating a huge sales opportunity and forcing some to make irrational decisions.
The change is EMV technology that protects consumers and merchants against counterfeit fraud by encoding cardholder information within an encrypted microchip and data that changes with every transaction. This makes EMV (Europay, MasterCard and Visa) Chip cards more difficult to counterfeit than traditional magnetic-stripe cards.
The payment networks have set a soft deadline of Oct.1 for the switch. After that, merchants who accept magnetic strip cards could pay for any credit or debit card fraud that occurred in their stores. This “liability shift” looms over banks, payment companies and merchants.
In July, a survey by Wells Fargo of 600 small businesses using card readers showed 49 percent were aware of the deadline, 31percent have new equipment installed, 29 percent plan to get the new card readers by Oct. 1, and 34 percent planned to upgrade later. The Associated Press reported most small business owners cite cost – installation, equipment and software – for not upgrading.
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Dan Harrington, president of Boise-based NLP Secure, was invited to Better Business Bureau’s office recently to talk about the changes. NLP Secure provides payment solutions. Harrington said EMV technology holds benefits for businesses beyond fraud risk, including:
• Better management of financial risk.
• More international customers.
• More methods of payment.
High costs should not be the rationale for failing to upgrade, as the cost of not upgrading could be higher, he says.
“Work with your current provider,” Harrington advises businesses. “Get multiple bids, compare, research and make smart choices.”
Some merchant processing companies hire independent sales teams to go into communities and upgrade, change or sell new EMV equipment with long-term contracts.
Liza Johnson, of Merchant Service Brokers in Boise, says her company is hearing that a door-to-door sales firm based in Chicago has sold thousands of dollars in contracts. “We have one merchant in Garden City who was pushed into a $10,000 contract,” she says. “And another small store in Meridian that was pressured into signing an $8,000 contract.”
BBB CEO Dale Dixon urges business owners to:
• Research the company selling the EMV equipment on BBB.org.
• Take time to read any paperwork or agreements presented to you.
• Get multiple bids. Make good decisions, not panicked ones.
Sales made to businesses do not have the three-day cancellation period that applies to door-to-door sales at homes, he says.