Technology

How Chip Technology Affects Your Business

Jim Luff
Posted on April 6, 2015

By now you have probably heard of “chip technology” but may not fully understand what it is or how it affects your operations. Unless you have a lot of walk-in traffic, effects likely will be minimal since the difference is in the actual credit card, which is rarely used at the time of transaction in our industry.

However, if you have clients coming in to present their cards in person, you will need to upgrade your credit card terminal to a chip credit card reader to accept their cards.

What Is Chip Technology?

First, you must understand that the fake credit card business is booming. With the right equipment, thieves can steal real data from magnetic strips on real credit cards and create exact replicas. Credit card thieves are capable of duplicating holograms, bank logos and magnetic strips. Chip technology embeds a magnetic chip onto the front of the card and is loaded with security features.

The card requires a customer to enter a PIN into the chip reader while the card is inserted, similar to an ATM. The card remains in the reader during the transaction rather than being swiped. If a customer doesn’t know the PIN, the card cannot be used in the reader. Customers no longer need to sign for their charges, as the card works the same as an ATM. Once the PIN is entered, the transaction is approved. The chip cannot be replicated in any way as each chip is unique.

Chip and PIN Terminals

On Oct. 1, 2015, Visa and MasterCard will implement a Liability Shift Policy. Merchants who do not accept chip-enabled cards will assume all liability for credit card fraud committed against their business. Additionally, operators will no longer be able to use keypad entry terminals for processing cards, says Sarah VanBeek, account manager for Chosen Payments. VanBeek estimates up to 20% of Chosen Payments clients are still manually entering cards and will be forced to change to a Chip and PIN enabled card reader. This is an expense you will face eventually. If you process transactions through a computer, a chip-enabled USB credit card reader can be bought for about $50. If you are still using a keypad terminal, you can upgrade for $100 to $200 from tons of suppliers on eBay.

Verified By Visa/MasterCard

A more practical tool for the transportation industry is the new Verified By Visa/MasterCard program. Designed specifically to combat online fraud, operators who accept payments through its website or mobile app can implement this program that requires purchasers to enter a unique password to use the card through an online site. If you store credit card numbers in a PCI Compliant manner, after login, the customer can click on the Verified symbol to be prompted for a unique password and the transaction will be completed. This assures that the person placing an online order with a credit card is truly the owner of the card and helps eliminate fraud. By using this system, you can potentially reduce your transaction fees, according to Visa’s website. To download the toolkit and implement this program, visit the Visa website at http://usa.visa.com/download/merchants/us-vbv-merchant-best-practices.pdf.

Related Topics: credit card compliance, credit card processing, New Operator, operations, smooth operations

Jim Luff Contributing Editor
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