What’s up with EMV chips on debit and credit cards? Usage, for one thing, say banking experts, although adoption of chip-enabled card machines by merchants has been slow.
 
That’s unfortunate, according to some industry analysts, because by not providing and activating chip-enabled terminals, those merchants are assuming the financial responsibility for any card fraud that takes place in their establishment.
 
And, according to the CreditCards.com website, merchants in coastal areas are more vulnerable than their inland counterparts to point-of-purchase credit card fraud.
 
Before the October changeover, card issuers ate the loss if credit card fraud occurred. But the new rules, set by the major credit card companies, mean that if a fraudster now uses an EMV card, and a merchant doesn’t have the right equipment to verify the card’s authenticity, the business will have to take the loss, the CreditCards.com website stated.
 
Wells Fargo teamed up with Gallup to conduct a national survey this past summer to gauge small business readiness for the transition.
 
About half of small business owners contacted said they were unaware of the coming liability shift and unprepared for the transition. Only 31 percent said their existing credit card processing system accepted chip-equipped cards.
 
Among business owners who did not accept chip-equipped cards at the time of the survey, just 29 percent planned to upgrade their point-of-sale credit card terminals before the Oct. 1 deadline.
 
Another 34 percent said they would upgrade at some point in the future, and 21 percent said they never planned to upgrade.
 
Merchants’ reasons for choosing not to upgrade?
 
Some felt the cost of upgrading was too great. Some were not concerned about possible fraud liability, and others didn’t believe the chip technology would be effective in preventing fraud, the survey noted.
 
Mark Baumli, however, sees progress in getting retailers to upgrade their terminals.
 
“You are seeing how it’s becoming more and more commonplace,” said Baumli, executive vice president for products and operations at Wells Fargo Merchant Services Group.
 
The shift away from strip-only to strip-and-chip cards began occurring in advance of October, when MasterCard, Visa and American Express shifted such liability from themselves to retailers and banks that use their networks.
 
For months, card issuers have been sending their cardholders replacement cards bearing the electronic chip, and banks are getting on board.
 
“We have been providing communications to our customers since 2012, but somehow they weren’t getting the message. The increased communications in the October timeframe really helped,” Baumli said.
 
According to Baumli, 40 percent of merchant terminals nationwide were activated by the end of 2015.
 
Target, Walgreens and Trader Joe’s were among the large chains that led the way in terminal conversion.
 
Chip technology has been around for over two decades and is used in 130 countries, where it is the security standard in many countries, according to Bank of America’s chip card website.
 
“When purchases are made using the chip feature at chip-enabled terminals, the transaction is more secure because of a unique process that is used to determine if the card is authentic. This makes the card more difficult to counterfeit or copy,” the website states.
 
Markets that have adopted chip technology have seen as much as an 80 percent drop in card-present counterfeit fraud, according to Discover’s chip information website for merchants that accept its card.
 
The site points out that the U.S. is the only large economy in the world that has not already migrated to chip cards, adding, “Moving to chip cards in the U.S. will provide U.S. consumers with an improved transaction experience when traveling abroad.”