The One Big Reason Why Merchants Are Not Accepting Those Chip Cards

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(This post originally appeared on Inc.)

The verdict’s in: more merchants are getting hit with chargebacks because they’re still not accepting EMV cards.

Hopefully, if you’re in a business that takes credit cards you already know about the new EMV rules that the credit card industry started back in October, 2015. It goes like this: if you don’t have the capability to accept one of the new chip cards and there’s a fraudulent transaction the credit card company’s no longer on the hook. You are. This is a tough love measure the credit card industry undertook to reduce retail fraud and to also bring the U.S. into the 18th century on credit card transactions when compared to other major countries around the world. Shoppers can still swipe, for now. But retailers need to, at the minimum, give shoppers the ability to use their chip cards.

Unfortunately, many retailers aren’t doing this. And they’re starting to pay the price.

According this report from the Wall Street Journal: Chargebacks among small and medium-size merchants rose 15% in the fourth quarter from a year earlier, according to a recent survey by The Strawhecker Group, a payments consulting firm. The industry believes the volume of chargebacks has likely risen since then, because the fourth quarter included only a few weeks under the new rules and it often takes a while for the costs to flow through to merchants. This is because, according to a similar report referencing the same study from USA Today: Despite an October milestone that largely shifted the burden of liability to merchants, only 37% of businesses are currently able to accept chip-enabled credit and debit cards.

People in the payments industry are disappointed and surprised. They say to each other: don’t these merchants realize that they’re now responsible for any potential fraud? How can they leave themselves so exposed? How can they not make this conversion?

These people don’t understand you, do they? Of course they don’t. They don’t run a business. They collect a paycheck. You haven’t converted for one simple reasons: there’s no ROI.

You’ll need new point-of-sale credit card machines–and these things can cost a few hundred bucks each. You’ll have to have them installed by someone and that’s going to cost you. Your employees will need to be trained. You’ll need to learn the software. You’ll likely have to pay ongoing maintenance to someone. And, like all technology implementations there will be disruptions, delays and bugs. And that means lost sales and productivity. But hey, who cares? The credit card industry isn’t paying for this. They’re shifting the costs on to you. They’re making you pay for the upgrades and new equipment or else you’re going to pay for any fraud.

And what happens when all of this is done? Nothing. No change to your business whatsoever. No new sales. No gains in productivity. You’re getting zero Return on Investment. And you’re not even sure you understand why you’re being made to do this. You get that these new cards have “encrypted” chips on them so the data is more protected. But if someone’s using a stolen card then they can still do what they were doing before even when they were swiping. They’re not being asked for a PIN like every other country in the world requires. So without the PIN, is the fraudulent transaction any more avoidable? Nope. The credit cards industry promises that PINs are coming. No one will say when.

So, in these times of big-box-retailer competition, a slow economy, higher minimum wages, new overtime rules, increasing health care premiums, more local, state and Federal taxes and further demands from your employees, you’re now being forced to spend money on a technology that will not only cause a disruption but provide no real benefit or ROI to your business–just to the credit card industry.

Unfortunately here’s the bad news: you’re going to have to do it. Someday, some jerk is going to pull off a fraudulent transaction at your store and your credit card company isn’t going to cover it. Someday using chip cards will be commonplace and your customers will expect to be using one so you will look out of date if you don’t provide that capability. You may even face a competitor who gives the impression that buying products at your store is “less safe” than at theirs. More retailers, big and small, will be forced to make this investment even though it provides them no ROI. My advice is to suck it up and plan for the investment before the end of the year. You really have no choice. But you do have my sympathies.

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