Study Shows 37% of Merchants are Equipped to Accept Chip Cards: What This Means for You?
 

by Julie Myhre-Nunes March 30, 2016

 

Hand Push Credit Card Into A Credit Card Machine : Selective FocWe all remember the confusion last October when the U.S. made a switch from magnetic stripe to chip cards, also known as EMV (Europay, MasterCard and Visa) cards. While it’s been several months since the big switch, something most Americans have discovered is while they may have a chip credit or debit card, many of the retailers they shop at aren’t equipped to process chip transactions. In fact, a recent study from The Strawhecker Group found that as of January 2016, only 37% of American merchants are able to accept chip cards. Everyone in possession of a chip card has likely had the awkward experience at the grocery or drug store when of trying to insert their card into a chip reader only to learn that it doesn’t work. Since merchants were legally required to update in October, it’s alarming to see that 63% of merchants have still not made the transition.

 

 

Upgrading to chip readers may be easier said than done, as it not only can be expensive since the merchants must purchase new terminals, but it also requires additional steps. As cited in The Strawhecker Group’s study, there are three reasons why merchants are slow to upgrade: payment processing readiness (the POS software isn’t ready), gateway readiness (the POS device isn’t usable) or a lack of technical staff resource available. While there isn’t a fine or fee for any non-upgraded merchants, those unable to accept chip cards will be required to cover any financial loss in the event of a breach, which can be detrimental to both small and large businesses. Although the number of upgraded merchants isn’t as high as it was expected to be by now — it was estimated to be at 40% — researchers anticipate that 72% of retailers will be chip-ready in December 2016 and more than 90% will be ready in 2017.

 

The main reason why the U.S. made the switch to chip cards is security, as we’re decades behind Europe’s switch to chip cards, which is why we’re the front runners for credit card fraud. When you make a purchase with a magnetic stripe card, the whole account number (as it appears on the card) is transferred through the POS terminal to complete the purchase. Conversely, when you make a purchase with a chip card, the chip generates a one-time code that is used in the place of your card number to complete the transaction — that’s why chip card transactions take longer to process than magnetic stripe ones. This code is unique to each transaction, which means if the merchant falls victim to a data breach, any of your exposed card information will not be valid.

 

Since most retailers are slow to upgrade, it means that consumers are forced to use the less-secure magnetic stripe to pay for products and services. Although there are no penalties to consumers using the older method, by forcing consumers to use their magnetic stripe, businesses are essentially allowing their information to be exposed in the event of a breach.

 

So what can consumers to do protect themselves? Unfortunately if a consumer’s regular stop, such as a grocery store or gas station, isn’t equipped to accept chip cards, the only real option the consumer has is to stop shopping at that location (assuming there are other comparable stores nearby that accept chip cards). If that’s not an option, the consumer should be vocal about their concern over the chip card readers. Ask managers and store clerks about when they intend to upgrade. While they likely won’t be able to give you a definite answer, they will note that their customers are concerned about their privacy, which may help encourage them to speed up the upgrading process. Similarly, if you’re someone who still hasn’t received a chip card from your bank or credit card issuer, it’s time to pick up the phone and give them a call. Find out when you can expect to receive the card. Again, there may not be definite answers for you, but there’s no harm in checking in.