[IMGCAP(1)]Credit card fraud is an ongoing concern for consumers, but recent developments will have a significant impact on your business clients if they have not yet invested in new technology supported by the Obama administration.
Recent data security breaches have caused a greater need to protect personal and confidential information and keep it from falling into the wrong hands. As a result, the U.S. has transitioned to EMV (Europay, MasterCard and Visa) chip card technology and credit/debit cards now have a small chip embedded into the plastic.
This secures customer data better than the traditional magnetic strip, making it much harder to steal card numbers and use them at other retail locations. In October 2015, businesses were incentivized to begin using the new chip-enabled credit card terminals that were introduced into the market in recent years.
Businesses now risk paying for fraudulent transactions should they transpire if they have not invested in and implemented EMV chip card terminals. Prior to this initiative, credit card banks and payment processors absorbed monetary losses resulting from fraudulent card use—not the merchants—but this is no longer the case. If your business client does not comply with these changes, they will accept some liability for any fraudulent transactions that originate from their business.
This shift in liability from the payment processor to the merchant is not yet fully known. According to the latest Paychex Small Business Survey, only 56 percent of business owners across all industries are aware of the change, and only 29 percent are equipped to accept EMV chip-enabled cards.
As CPAs, this provides an opportunity for you to discuss the importance of security with your clients. While not all businesses are necessarily impacted by data security breaches that lead to fraudulent transactions, there is a financial risk by not upgrading to this new technology.
Recognizing the responsibility to process transactions correctly is key to preventing fraud losses. Here are three important pieces of information to share with your clients to help them clearly understand how to use EMV technology:
• Employees should be educated on the new procedure, as this is new for consumers as well. Some customers may not realize that their credit card now carries a new chip, and some cards will require the customer to enter a PIN number to complete the transaction. Your clients should educate their staff, as well as prepare them for guiding first-time users through the process.
• In most cases, credit cards will also stay with the customer during the entire transaction. In the past, some payments, including those at restaurants, have typically been processed by taking the credit card from the customer to a remote terminal. Restaurants are now being encouraged to implement terminals that can be brought to the table, allowing the chip card to remain with its owner.
• EMV technology takes a few seconds longer to process a payment. For businesses accustomed to handling longer customer lines during peak shopping seasons such as the holidays, a slight rethinking of the transaction process from start to finish may help improve efficiency.
With the proper equipment and training, the transition to EMV chip cards should be relatively painless for your clients, but they must be educated on the change. Given the financial risk involved, this is an important discussion to have, to help limit fraud in their business.
David Durick is a product marketing manager at Paychex, a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services, as well as credit card processing and other business services.