Exploring Payment Options: What Has EMV Done for Small Businesses?

EMV payments refer to credit and debit cards that feature microchip technology. The acronym stands for Europay, MasterCard and Visa. EMV technology first started in Europe in the 1990s, and due to the success of its implementation abroad, EMV has now become the new standard for secure payments in the United States as well.

In October of 2015, major card associations enacted a “liability shift” that encouraged businesses to adopt EMV technology into their point of sale systems. The idea behind the liability shift was to encourage businesses to invest in EMV card readers to help make transactions more secure.

Customer credit card
According to a recent Visa survey, consumers are adjusting to the changes that chip cards bring. 35% of consumers, the highest percentage in the survey, believe chip cards are the safest way to pay.

Because the penalty for non-adoption included accepting responsibility for certain kinds of counterfeit fraud losses involving sales where the card was present, many merchants rushed to accept EMV cards.

By the middle of 2016, about 30% of U.S. merchants had updated to accept EMV payments.

Currently, approximately 80% of U.S. consumers have chip cards. However, as of March 2017, only about 39% of merchants were ready for processing these newer, more secure cards.

How EMV Payments Changed the Sale Process

Initially, customers were frustrated by EMV card systems. EMV cards added an average of six seconds per transaction and customers were used to quickly swiping a payment card.  As a result, some major retailers continued to allow some customers to swipe EMV chip cards instead of inserting them.

Unfortunately, each of those transactions where an EMV card was swiped instead of inserted left the merchant liable for any fraud-related chargebacks or losses.  Therefore, merchants began to insist that chip-enabled cards must be inserted as it was designed to do.

Although adoption of EMV payment processing has been relatively slow, it is now spreading into medium-sized and small businesses.

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Issues and Benefits Associated with EMV Chip Cards

The EMV chip authenticates the card used by the consumer, protecting merchants from stolen or fraudulently made credit cards. This protects both merchants and consumers, although it doesn’t eliminate all fraud risks, such as the potential for falling victim to card skimmers or other forms of financial information theft.

Inserting the card, however, can increase transaction time by a fraction of a second for a swipe to five or ten seconds. Thankfully, the processors are addressing this issue, with different software that allows for card insertion processes of two seconds or less. Some systems also allow card insertion earlier in the checkout process, which can speed up transactions substantially.

Small Businesses Cannot Afford Major Fraud Losses

Many small business owners have been hesitant to adopt EMV card readers for a range of reasons. One of the most common concerns is the cost of investing in new card readers. Another worry pertains to customer frustration and protracted insertion times.

As noted above, however, card companies are already improving their software to address this concern. Also, the price of new card readers could be negligible depending on your contract with your payment processing company. More importantly, the cost could easily be covered by the prevention of a single fraudulent transaction.

EMV Chip card
In 2016, the number of people using chip cards skyrocketed. Visa cards alone experienced a 135% increase from 2015 to 2016 in the number of consumers using EMV cards.

Small businesses historically worry less about data breaches and credit card fraud than massive corporations, but you should still be as vigilant as possible.  An international company with thousands of locations can painlessly absorb minor fraud losses. For small business owners, however, the loss of funds combined with the loss of merchandise could be a serious financial setback.

It is important for small business owners to understand that consumer attitudes about EMV cards are changing rapidly. While there was a time when people found the new system frustrating and off-putting, many customers now appreciate the extra layer of fraud protection offered by EMV cards.

EMV Is the New Standard for Security

Roughly 81% of credit cards and 46% of debit cards in the United States are EMV-enabled. That number continues to grow, especially as more small business owners come to understand the protections offered by more secure EMV transactions.

customer paying cashierWhile convenience and perceived delays can impact your conversion rate in-store, the likelihood of that having a major impact on a small business’ bottom line is minimal. Yes, long lines can lead to potential customers walking away instead of waiting to pay at a point of sale counter. Those minor losses will likely be offset by consumers who feel greater peace of mind at your business because you offer more secure EMV card processing.

Industry experts predict that small businesses without EMV processing may soon become targets for fraudsters who cannot bypass EMV systems at bigger stores. Failing to upgrade could make your business more at risk for serious fraud events in upcoming months.

For those still uncertain about the potential benefits of EMV card processing, however, the reduction in fraud related to their use speaks volumes. Between April 2016 and April 2017, U.S. merchants with EMV-enabled terminals experienced:

  • A 58% decline in counterfeit card fraud
  • A 28% drop in financial losses related to fraud

Even if your average transaction value is lower than the average sale at a bigger retailer, your business will certainly benefit from fewer fraudulent transactions and the reduction of related losses.

Learn more about EMV.

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