Q&A talks about how Connecticut retailers are adapting to new credit card liability rules with Tim Phelan, president of the Connecticut Retail Merchants Association.
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Q&A talks about how Connecticut retailers are adapting to new credit card liability rules with Tim Phelan, president of the Connecticut Retail Merchants Association.
Q: Connecticut and the nation have recently launched new credit card terminals requiring customers to enter PIN codes. How has the rollout been?
A: The Oct. 1 change was a behind-the-scenes change in rules between the merchant and their card brands. It is designed to encourage merchants to upgrade their equipment and also encourage banks and credit unions to issue more secure cards. Merchants or issuers are not “required” to upgrade. Failure to upgrade, however, will shift the liability for counterfeit cards to the organization with the least secure solution. Most banks are choosing to issue chip and sign cards not chip and PIN cards. The card networks are letting each institution choose sign or PIN. Under the new rules, merchants are liable for counterfeit transactions that involve a chip card being swiped into a magnetic strip terminal, rather than a chip terminal.
Q: What are your members expecting the impact to be during the upcoming holiday buying season? It seems as if transactions take longer to complete. That could mean longer lines on Black Friday for example.
A: Chip-card transactions take about 10 seconds longer once the transaction has been initiated. In addition, the cardholder needs to be taught a new way to handle the transaction: You dip the card instead of swiping it. During the transaction you need to leave the card in the reader. This allows the cryptogram to be “refreshed,” which is the whole point of converting to the new system.
While we know that there is a “learning curve,” most consumers and retail clerks will become very familiar with the transaction process and thereby minimize the delay at check out.
Q. How are your members reacting to the new technology? What are their thoughts on their increased liability for credit card fraud?
A: Retailers, by nature, want to sell goods or services and they adapt to the consumer's choice of payment. This enhancement is good for the ecosystem and will minimize the impact of a data breach. Once a merchant upgrades their terminal, the liability for counterfeit cards moves back to the issuer.
Q: What's been the cost to business? How expensive has this been to rollout?
A: If a retailer has a standalone terminal, the cost for upgrading is less than $500 per check-out station. If a retailer has a point-of-sale (POS) cash register system, the cost for the hardware is also less than $500. In the case of a POS system, there are additional expenses for rewriting the code to handle the chip data. This cost varies widely based on the system and whether or not the code is handled by your staff or outside vendors.
Q: There's been some grumbling that these new chip credit cards do nothing to prevent online theft where no PIN is required. Do your members feel they're being unfairly targeted by the new technology and its liability penalties?
A: The liability for online transactions is (and always has been) borne by the merchant. A merchant that handles online transactions should already have strong anti-fraud tools. In other developed countries that have converted to chip, online fraud has gone up because that is the only place that a “bad guy” can use the data that they have stolen. If a merchant does any online transactions, we are encouraging them to review their procedures now, before the fraud starts to ramp up.
