Most of us have heard that chip cards are more secure. When it comes to processing credit cards and debit cards, chip cards have been the standard for many years. Chip cards, also referred to as Europay, Mastercard, and Visa (EMV) cards, are in fact significantly more secure than many other forms of electronic payments. Yet very few of us understand exactly how this works. Today, we will explore how chip cards keep customers and businesses safe and why merchants who continue to process cards by swiping are putting themselves at risk.
Chip Cards vs. Magnetic Stripe Cards
There are two basic ways in which a credit card transaction can be processed:
Card present transactions (swipe, chip reader)
Card-not-present transactions (inputting credit card number manually, over the phone, or online)
While the actual transactions and authentications of credit cards remain virtually unchanged regardless of the transaction method, the security of chip transactions vs. swipe transactions is enormously different. This stems from the fact that those seeking to commit credit card fraud and/or identity theft have a much easier job forging swipe cards.
Swipe cards store a digital string of numbers held in the magnetic strip on your card. Traditional swipe card information is relatively easy for criminals to steal and subsequently transfer onto a new, fraudulent credit card. Chip cards (EMV cards) use encrypted codes to keep this information secure. This all but removes the possibility of a criminal stealing your credit card information during a transaction.
Why are Chip Cards More Secure for Businesses?
Now that we understand why EMV cards are more secure than swipe cards, why does that matter for small business owners? After all, isn’t it the customer who is at risk for fraud and identity theft issues? In fact, quite the opposite is true.
Businesses are culpable for losses incurred due to fraud. Where consumers are generally protected beyond $50 in fraudulent charges, businesses are responsible for recovering their lost goods and or funds. If you are unable to locate and recover your losses, your business is out of luck!
Businesses run the risk of penalties for fraudulent purchases. It doesn’t get any better from there. Merchants may also incur penalties including chargebacks, account suspensions, or even account terminations based on fraudulent activities.
Businesses are required to read the chip for EMV cards. To be clear, swiping chip cards will work to complete a transaction. However, swiping a customer’s EMV (chip card) immediately puts your business at risk. If a customer disputes a transaction where a chip card was swiped, your business will be held liable. The chargeback will be decided in favor of the customer regardless of the facts and documentation. These fatal chargebacks have become more common since the EMV (chip cards) were mandated.
How to Process a Credit Card with a Chip
The good news is that all of this can be avoided by simply following standard security and fraud prevention guidelines. Here are a few ways to stay compliant and accepting EMV cards to keep your business in good standing:
Always use the chip reader for cards when available: Nearly all credit and/or debit cards in circulation today have a chip. Simply direct your customers to use the chip reader and do not allow them to swipe their card unless absolutely necessary. The card will remain in the card reader until the authentication process has been completed. And it’s as simple as that.
Remain PCI compliant: The Payment Card industry-Data Security Standard (PCI) sets the rules for best practices when it comes to payment processing. Work with your merchant services provider to remain compliant at all times.
Utilize up-to-date security software and hardware to process payments: Not all POS systems and/or card readers are created equal when it comes to security. Make sure you do your research and select the correct tools to keep your transactions safe and secure.
Is Accepting Credit Cards Worth the Potential Fraud Risk?
All business decisions are calculated risks. The decision to accept credit and debit cards rather than operating as a cash-only business is a calculated risk which we believe is well worth the potential downsides. Despite all this scary talk about account suspensions and unrecoverable losses, the fact remains that chip cards make stealing credit card information virtually impossible. And that is precisely why all businesses should insist on using chip readers rather than allowing cards to be swiped.
A major component in all of this is selecting and working with a reputable merchant services provider. The right merchant service provider can offer security solutions, up-to-date software, and the latest hardware to protect your business. Fraud is certainly a legitimate concern, but there are a multitude of powerful solutions to tip the scales in your favor.
Payment Processing and Payment Security from True Merchant
At True Merchant, we understand that a few simple tips from a singular article isn’t enough to keep small business owners protected. That is why we offer a number of dedicated merchant services including CardSecure. Lean on our extensive experience to handle the payment processing security for your small business. Whether you have questions about how to process credit cards or whether you are looking to expand your business through a loan or merchant cash advance, we are here to help.
To speak with a payment processing security professional, please call or email us today. Your small business is worth protecting!