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Sea Change in Credit Card Liability Coming for Small Business

Alex ChamandyThe following post is written and sponsored by Alexander G. Chamandy of Envescent, LLC, the IT services provider to ARLnow.com.

New requirements for vendors that process credit cards will cause a significant shift in liability for certain types of fraud. But many small business owners are not ready for this important change in payment processing.
 

What is EMV chip-and-sign and how does it work?

EMV technology embeds a microprocessor chip in the credit card — this provides a more secure authentication mechanism that accomplishes two milestones:

  1. verify the credit card’s physical presence at the point of sale;
  2. transmit unique data for each credit card transaction.An EMV chip (illustration).

EMV chip-and-sign reduces the amount of account information compromised from insecure credit card terminals.  It also prevents a malicious party from easily stealing customers’ card swipe data to create counterfeit copies.

The EMV chip is visible on most newer cards as a small gold-colored square (see the above right graphic).  The primary goal of EMV chip technology is to reduce fraud and improve credit card security.  EMV is an industry acronym that stands for Europay, MasterCard and Visa.

How are these new requirements changing liability?

Merchants that fail to adopt EMV chip-and-sign technology may be liable for counterfeit, lost and stolen credit card transactions at their location. Merchants who do adopt the new technology should continue to enjoy the same level of fraud protection as they have previously. The new requirements specifically designate the party without EMV capabilities to be liable for losses related to credit card fraud at their location.

Most credit card companies have already issued EMV-enabled cards, and many merchant processors have enabled their EMV credit card processing systems.  That leaves the changes necessary to avoid potential losses from credit card fraud in the hands of business owners.

When is the deadline to convert to this technology?

October 1, 2015 will be when the credit card payment processing liability shift will occur in the United States for most businesses. Merchants processing credit cards at their location must have EMV chip-and-sign readers setup at all point of sale devices to ensure compliance.

How can I prepare my business for these new requirements?

Contact your credit card payment processing service and ask:

  • how the new requirements effect your account;
  • when the changes will take effect for your account (if not October 1st); and
  • what steps your business needs to take to prepare.

Payment processing hardware may need to be upgraded, in some cases payment processing software may also need to be upgraded.

Online sales and manual entry of credit card account information will not be affected by these new requirements.

About the author

Alexander G. Chamandy is a seasoned IT professional with 20 years of industry experience and a lifelong Arlington resident.  He has deep expertise helping small businesses with a number of IT issues, including cybersecurity, data recovery, networking, deploying and maintaining servers as well as open source software.

If your small business needs IT support or consulting, contact Envescent, LLC.  Envescent has helped over 15,000 clients in the Washington, DC area and beyond since 1999.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

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