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    Retailers: What Chip-and-PIN Cards Mean to You
    James Nagy
    / Categories: Technology

    Retailers: What Chip-and-PIN Cards Mean to You

    Have you heard the buzz?  The end of the swipe-and-sign credit card is near.  Well, the end has already happened in many parts of the world, but the US is finally following suit after some pretty big events (Target, Neiman Marcus, etc).  What does this change mean for you?  What does this change mean for business owners all across the country?

    First let’s dive into what’s actually happening here.  Starting October 2015, you will no longer be swiping your credit card. You will, instead, insert your (new) card into a slot of a machine.  The machine will then read a microchip, not a magnetic stripe.  You will then either sign your name (for now) or enter your PIN number (if the card issuer has added them to their cards.) 

    What is this “EMV” technology?

    The term “EMV” refers to a specification for the technical requirements of chip-enabled payment devices, generally credit and debit payment cards with embedded microchips, and how the cards interact with point-of-sale and ATM infrastructures. There are many “flavors” of a chip-based payment standard, including using chip + PIN only or chip + choice (the option of using either PIN or signature) as cardholder verification tools; the majority of EMV implementations globally have focused on chip + PIN enablement. Whatever the format, smart chips are the basis of the technical standard behind more than 1.24 billion payment cards and 15.4 million POS terminals,3 with almost all of those cards and acceptance devices residing outside the United States. Europe, Canada, Latin America and Asia/Pacific are all in various stages of EMV chip migration and usage, leaving the U.S. region—the largest user of payment cards in the world—as the last major hold-out for implementing the otherwise global standard.

    What are the benefits to the consumers?  Well first, requiring customers to enter a PIN prevents checkout staff from handling your card.  Consumers must handle the point-of-sale device directly to insert their cards and verify payment.  Under the current system, it is all too easy when a checkout staffer takes your card for them to swipe it through a card-copying machine or when a member of the wait staff takes your card to pay your bill, etc.  The Target hack was accomplished when hackers were able to alter the point-of-sale machines to copy the info on the magnetic stripe of the card when swiped. Chip-and-PIN technology would make this hack useless because the number on the chip alone wouldn’t help them.  They would need the PIN as well.

    Now that the change is a reality, it’s up to the banks to issue new cards to consumers and it’s up to merchants to update their existing systems to accommodate the new cards.  Why is this significant?  A big part of this changeover is the liability shift when fraud does occur.  This means, whenever card fraud occurs, someone is determined liable for the costs.  In this case, whichever party has the lesser technology will be responsible for the cost.   If the bank has failed to issue a chip card and pin number to the customer –the bank would be liable.  If the merchant is still using their old system where they can run a swipe and sign transaction –the merchant is liable.  This is extremely significant to business owners.  This means everyone.  Every gas station, every McDonalds, every restaurant, bait shop, etc.

    The idea is to encourage all merchants and banks to update at the same time so that the transition is a smooth one.  I have a feeling though, that this shift in liability is going to come to quite a surprise to merchants who aren’t paying attention to this change in payment methods.

    So, alert all shop owners, small business owners, etc.  A big change is coming.  It’s definitely beneficial to consumers and to fighting fraud, but merchants should be aware of their responsibility in switching over.  What are your thoughts?

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    James Nagy

    James NagyJames Nagy

    Need a consultant today, how can I help? As Co-Founder and Managing Partner of J&S Tech Designs, I have three decades of experience and expertise to share with you and help your business, product, or idea thrive. If you like this article, please sign up for our newsletter!

    Other posts by James Nagy
    Contact author Full biography

    Full biography

    James Nagy is managing partner and co-founder of J&S Tech Designs - a business consulting organization that specializes in providing software and website design, development, and management expertise to organizations. He is also Managing Director and one of four co-founders of Sprocket Websites, Inc. and Chief Executive Office and one of four co-founding members of Clinical Collaboration Software, LLC.

    James has over twenty-five years of experience in the information technology field, spending twenty years in software development, sixteen years in executive management and the last six years as a serial entrepreneur launching and running several successful technology organizations.

    Throughout his career, he has led companies, divisions, departments and teams to successful outcomes. He has executed process reengineering within organizations that were struggling to produce. He has provided strategic vision and organization planning in situations that needed direction. He has built complex systems in several unique marketplaces that required thorough knowledge and expertise to be successful. It is his passion for excellence and desire for success that has enabled him to meet the challenges presented and continue to exceed expectations.

    James’ passion for delivering innovative solutions and creative strategies enabled him to develop strong business foundations for long-term success. He is an active member of the Conejo Valley Chamber of Commerce, the North of the River Chamber of Commerce and the Naperville Area Chamber of Commerce where he served on several teams, advisory committees, and legislative groups. He is a founding member of the Chicago Area DotNetNuke Users Group that has held several large, successful Website design and development events. James has donated time, money and expertise to many volunteer, fundraising and charitable organizations like KidsMatter of Naperville, The Naperville Film Festival, Summer Place Theatre, TEDxNaperville, Neuqua Valley High School Senior Spectacular and many others.

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