Chip cards protect retailers and customers from fraud

By Lisa Gibbs, SVP, Card Services

Learn about easy and affordable ways to adopt this technology.

Since Oct. 1, 2015, just a little over one-third of merchants have changed over their credit- and debit-card systems to process chip cards. Some have installed chip-reading terminals but have not fully activated them. Others still use equipment that only swipes magnetic-stripe cards.

“We think it’s important for merchants to protect themselves from fraud by fully converting to chip-card technology,” Mary Lew Epstein, VP Credit Card Product Manager at MB Financial Bank, said. “Otherwise, they continue to be liable for payments made on counterfeit, stolen or lost credit and debit cards.”

Chip cards have been shown to reduce fraud. The United Kingdom was the first country in Europe to adopt this technology a decade ago. Since then, from 2005 to 2013, fraud committed during card-present transactions using counterfeit cards declined 56 percent, and fraud caused by lost or stolen cards went down 34 percent. The technological capabilities of chip-enabled cards made this decrease possible, according to Rippleshot, a company that identifies and mitigates card fraud for retail and corporate clients.

Changing over to chip-card technology can be simple and affordable for retailers, including small and mid-sized businesses. Here, we take a closer look at three of the most important reasons for making the shift now. Fraud Costs

1. Chips offer greater security for customers’ cards. By processing only chip cards, merchants protect their customers as well as themselves. Chip cards got their name because they contain a microprocessor (the chip). When a customer inserts such a card into a terminal with activated chip technology, the microprocessor generates a single-use code that processes the specific transaction, rather than relaying the number printed on the card. It’s that difference that makes chip cards so secure. Should the merchant database containing transactions be breached, the information is useless to hackers or counterfeiters because the codes have expired.

2. Inexpensive chip-card equipment is widely available. Where the choice was limited just a few years ago, a variety of companies now make and sell chip-reader systems. Many of them are affordable, especially when you consider that other high-tech devices bought for a business, such as smart phones, can easily cost $500 or more. Chip-card terminals cost an average of $200 to $900. Some sellers, such as Elavon, also offer affordable leasing programs that let businesses lease chip terminals for less than the cost of buying them, according to Richard Garvey, an Elavon regional account executive in the Chicago area.

“Purchasing or leasing chip-enabled equipment is a wise investment because it protects retailers from potentially thousands of dollars in fraudulent charges,” Garvey pointed out.

3. Training employees and customers is straightforward. Chip technology presents a new way of accepting debits and charges that is a bit different for businesses. Chip terminals prompt employees and customers at each step, so the process should become second nature after a few transactions. While most customers know to insert their card and leave it in the machine until they’re prompted to remove it, employees may have to show them how.

The transition to chip cards is an investment, but it is one that will pay off in greater security for businesses and their customers now and long into the future.