Understanding New Payment Processing Options
Understanding New Payment Processing Options
Stripes are out! No, that's not a fashion edict. It's a financial one.
Beginning October 1, 2015, the new standard for noncash and noncheck payments will be "insert" or "tap", not "swipe". That's when U.S. merchants are required to have new EMV card readers for checkout or become potentially liable for counterfeit and lost or stolen card fraud. The only exception is pay-at-pump transactions - those merchants have until 2017 to comply.
Here's what you need to know about customer point-of-sale (POS) options for your small business.
EMV Encryption
EMV stands for EuroPay, MasterCard and Visa, the organizations that developed the new card with a microprocessor that is the global standard for fraud protection. Magstripe cards are being steadily replaced by EMV-compliant cards, which offer superb security and convenience by:
- Requiring customer PIN entry and/or signature with each POS purchase
- Adding authentication measures for card-not-present transactions (e.g., online payments)
- Avoiding the need for cards to ever leave the owner's possession
Here's how it works:
- Embedded microprocessor connects with EMV-enabled POS device/terminal
- Securely stored information is temporarily accessed from the embedded chip
- The cardholder signs ("Chip and Sign") or enters a unique PIN ("Chip and Pin") to further validate transaction
- The financial institution validates the customer's PIN to complete the secure transaction
EMV also enables near-field communication (NFC), also known as radio frequency identification, which enables customers to tap or wave their cell phones or special key fobs to transmit payment. Apps like Google Wallet and Apple Pay make these contactless or tap-and-go payments possible. The close proximity between the reader and a customer's credit card or smartphone allows wireless transmission of payment information to the business and issues a complete receipt to the customer. Because of the added security layers, EMV transactions take 5 to 8 seconds longer than old-style swipes.
A Significant Reduction in Credit Card Fraud
According to data from Chase Payment Solutions LLC, the impact on counterfeiting - which makes up 37 percent of U.S. credit card fraud - could be huge. In the first five years after adopting EMV, for instance, Canada experienced a 54 percent decrease in counterfeit fraud.
Many retailers, restaurateurs and other small business owners are hurrying to upgrade their POS and mPOS systems to accommodate the EMV technology and get processing procedures down before the holiday rush.
Before purchasing new equipment, talk to your payment processor and POS vendor to understand the options and then choose the best EMV-enabled reader for your register/tablet and business.