It seems like credit card fraud is becoming more and more prevalent.  There have been several stories about security breaches in the news recently, most notably the Target data breach late last year. These incidents have prompted the major credit card companies to increase security measures and make changes to credit card processing in order to reduce fraud. By 2015, about 70% of credit cards will include EMV security chips.  The chip technology, which has been used commonly in Europe and Asia for years, creates a unique transaction code every time the card is used.  So, if the transaction code data is stolen it is worthless since it cannot be used again.

What does this new security feature mean for merchants that accept credit cards? It means that, most likely, you’ll have to upgrade your payment-processing terminal in order to become EMV compliant.  For now, it sounds like the first round of EMV cards issued will still work with non-compliant systems.  But, the credit card companies have made the deadline for merchants to become compliant October of 2015. At that point, merchants will still be able to process credit card transactions using non-compliant systems, but they will become liable for the costs of fraudulent transactions. Currently, either the payment processor or the bank that issued the credit card is liable. This is a good argument for upgrading by October of next year. Of course, upgrading to a new system will mean paying anywhere from $200 to $1000 for the new terminals plus the time it will take to learn a new system and train employees.

Right now, the merchants most affected will be those that accept credit cards in person. Those merchants that accept credit cards online or over the phone will most likely have to comply with increased security measures as well, but it is still unclear as to what those measures will be and when they will take effect.