A new survey from TD Bank finds that several factors are holding back small business owners from quickly adopting cards with embedded chips, known as EMV (Europay, MasterCard and Visa) cards. EMV cards are more secure than the older magnetic strip variety, which means their slow adoption leaves more consumers vulnerable to credit fraud from counterfeit, lost or stolen cards. Slow adoption can also leave small business owners vulnerable to footing the bill when instances of credit fraud do happen.
On October 1, 2015, the liability for damages arising from credit card fraud shifted from the card issuers to merchants for all swipe transactions performed on EMV cards (the new cards still work with the older terminals). Surprisingly, the survey finds that about 19 percent of merchants were either unaware of or indifferent to the new compliance rules for EMV payment terminals, and only a minority of small businesses have installed them, with many reporting concerns about or obstacles with adopting the new technology. The latest information is that new POS terminals are operational at only about 25 percent of locations.
Conversion cost is a factor mentioned by 58 percent of small business owners (SBOs) in the survey as to why they have been slow to upgrade. Part of the problem is misperceptions about the cost of switching to the new payment terminals. Although several pre-deadline reports put the price at $1,000 per installation, actual costs reported by survey respondents indicated the average cost to be about $450 per installation. Many merchants work on tight margins, and for those who perform relatively few credit/debit card transactions, the perceived high costs of transitioning to the new EMV technology can seem a significant roadblock.
Although 73 percent of SBOs expressed little or no concern about their exposure to the damages of credit card fraud, it is hard to say that indifference to security is holding back the conversion process. Only 13 percent of non-adopters admitted a lack of credit fraud concern, and 70 percent of adopters listed security as the foremost benefit. The survey reports that 58 percent of adopters say that the new cards are better at protecting consumers’ information, and 54 percent mentioned that installing EMV card readers shields their businesses from fraud liability.
The last major obstacle reported by the survey (mentioned by 37 percent of SBOs) involves the amount of time it takes to set up and learn the new payment system and the effort involved in educating customers about the new process (36 percent). The new terminals read EMV cards through partial insertion rather than swiping, and the transaction takes a few seconds longer with the new equipment.
While the survey indicates that SBOs face real and perceived obstacles to updating their point of sale systems, it’s important to consider that a single instance of credit fraud could easily exceed the one-time costs of upgrading systems to comply with new rules. If your business is trying to figure out how to finance the installation and activation costs of new EMV terminals at your retail locations, it may be worthwhile to consider taking out a commercial business loan. Alternative lenders like IOU Financial look at factors beyond credit score, like daily cash flow, to assess whether your business is a good candidate for a loan that can be used for equipment upgrades.