How real is the liability relative to processing chip cards? 

Liability Relative to Processing Chip Cards

These days almost everyone has at least one credit card in their wallet that has the new chip.   If you’re a business owner you probably take several calls a day in reference to upgrading your equipment or becoming compliant.  So what’s the truth, are the people calling me being truthful or is it just another scam?  Is there really a compliance issue, mandate, or a liability issue?

The straight answer to this question is yes, if you have people pay you face to face where they can swipe a credit card.  In October of 2015 the card brands, Visa, MasterCard, Discover, and American Express instituted a new rule.  The rule is that if you process a card that was a chip card and you don’t have the equipment or you didn’t process it as a chip card transaction then the liability is on you.  What this means is, if that customer decides to do a chargeback on that transaction then you are responsible for it.  When the rule was first implemented we didn’t see many banks mandate the rule at first, but now we see chargebacks being awarded to the consumer all the time regardless of whether the signature matches or not.  What that means to you as a retailer is that you’ll be out the money, out the product, and out whatever chargeback fee is assessed.  Obviously, that is a position you don’t want to be in.  The second point of liability which could be even greater is this.  If you are to get a breach where someone hacks into your system and steals customer data, and you haven’t done PCI nor have you upgraded to the new chip technology, then you’ll be out of luck an possibly out of business.  No questions asked you’ll be held liable for every part of that breach which would obviously be very expensive.  The cost associated from a breach of a retailer’s system is huge, just ask Target.  Obviously, they are a huge retailer but because big retailers have money to spend on systems to protect themselves, criminals are now focusing on small businesses as they spend very little on protection.

Why does it take so long to process a chip card?

If you’ve been to any retailer that has already implemented chip card processing, then you know it takes a bit longer to process these cards.  The reason for this is simple, each chip card transaction is unique in how it gets transmitted through the system.  When you enter your card, the details of that transaction get scrambled on the spot which is why it takes a little bit longer to create that scrambled string.  Many retailers have opted to not implement chip cards for this reason, but take heart.  With any new technology there are always going to be bumps in the road and thankfully companies like Target have paved the way.  The card brands have heard the complaints and have already come up with a solution.  The software loaded into the machines are slowly being updated so that they are considerably faster so now is the time to upgrade.  Don’t risk your business by not being compliant and risking even more liability than you already have, it’s just not worth it.

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