The new age of credit cards

EMV is coming. Ignore it, and you may be screwed.

In just over a year, restaurants are going to have to change a process that’s second nature: the way they accept payment—and many are likely to be unprepared. October 2015 is the deadline for switching to new credit-card readers that use chip-and-PIN technology. While some operators are taking a wait-and-see approach, assuming the deadline will be pushed back, others frankly may be sticking their heads in the sand (none we approached were prepared to comment on the subject). But that’s the date mandated by the credit-card companies—and it’s when liability for fraud shifts to operators.

What is EMV?

Credit cards that use EMV technology (short for Europay, Mastercard, Visa, the original companies that conceived the effort), often referred to as chip-and-PIN, use electronic chips in addition to magnetic strips to encode and store customer data. As the name suggests, customers will type in a personal ID number when they use their card to authorize payment. “It will cause operators and owners to change the way they think about bill presentation,” says David Matthews, executive vice president of innovation and member advancement at the National Restaurant Association. No longer will servers take a card in back, swipe it and bring a receipt to sign. Cards will have to be inserted into a reader in front of the customer so that they can input their PIN code, similar to how a debit-card transaction works.

While chip-and-PIN technology is only just beginning to show up in the U.S., it’s not new; France piloted a chip program in the 1990s, and it’s already become the standard in certain international markets such as Europe, Canada and parts of Asia. Chip-and-PIN has been shown to significantly reduce fraud due to lost, stolen or counterfeit credit cards, because a card with a chip cannot easily be replicated or recreated. Although it doesn’t protect against the large-scale data breaches that have made headlines of late, it does cut down on false charges, thus saving dollars and increasing consumers’ sense of security.

Why you should care

The impact is greater for restaurants than retail, says Matthews, as restaurants don’t often have fixed POS stations out front. Operators will have to decide what works for their operation—a single payment station where guests go up and pay or having handheld devices, he says. Both come at a price, especially for operators who just invested in getting current payment systems PCI Compliant. Where basic swipe-card processors can be had for about $100, EMV-compliant readers can be $200–$500, but prices can reach the thousands for tricked-out readers with printers, touchscreen key pads and more. For larger operations with integrated processing, the upgrade means a new or retooled system plus new terminals at each physical payment location, a hefty investment. Yet, since not every customer will have a chip-enabled card by next fall, operators still will need to be able to accept traditional swipe cards, something the new readers allow for.

The bigger issue? Currently, banks bear the liability for fraud. That will change next October, when credit-card companies’ policies  mandate that the onus largely shift to operators if they don’t have a chip reader.

What you should do

Talk to your current POS vendor about their capabilities, but also explore what other vendors can offer, says Matthews. “Use the opportunity to expand payment forms,” he says. By looking for systems that go beyond credit cards and accept mobile payments or sync payment and loyalty programs, you’ll be ahead of the next tech tide, not behind it. 

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