Beginning Oct. 1, businesses including Texas restaurants that do not use credit-card terminals designed to accept EMV chip cards will be liable for counterfeit card fraud losses. That means if a criminal pays with a counterfeit credit-card at a Texas restaurant that doesn't use an EMV card reader, the restaurant will be responsible for that charge-back. This marks a liability shift, as, up until this October, any counterfeit credit-card charges would be paid by the card's issuing bank. Essentially, restaurants that don't employ EMV card readers could be stuck with some hefty charge-back costs. The solution is obvious, right? Restaurants should upgrade their payment systems. But it's not that simple. In fact, the entire conversation surrounding EMV credit-card technology and Texas restaurants is pretty darn complicated. Many restaurateurs are unsure how to proceed, have gotten conflicting information or simply lack knowledge about the technology change altogether. EMV credit cards, or smartcards, represent a new generation of credit cards. They are chip-based payment cards containing all the information needed for making payment. The main advantage to EMV cards is that they will cut down on counterfeiting, which accounts for 37% of all U.S. credit card fraud. The United States is coming late to the EMV game but estimates are that by the end of this year, nearly 70 percent of credit cards and 40 percent of debit cards used in the U.S. €” more than 1 billion cards total €” will be EMV cards. Given this soon-to-be-ubiquitous credit-card technology, the equipment upgrades needed to take advantage of the technology and the costs and staff training associated with upgrading, not to mention the chargeback liability and a quickly approaching counterfeit card liability shift deadline, Texas restaurant operators are faced with the decision of whether to make potentially costly technology upgrades in the coming months. Jim Higgins, vice president of business and financial services for the National Restaurant Association (NRA), assures restaurateurs that, despite the rollout of EMV technology being somewhat complicated and many usage concerns being far from resolved, the sky is not falling, though he does admit to a bit of a chicken-and-egg scenario when it comes to implementing the technology. Should restaurants buy EMV compatible hardware now or wait until more consumers are using EMV cards? "Restaurants are not required to implement any new technology this October. That date begins a liability shift for counterfeit card transactions. This really means that if a criminal buys a meal at a Texas restaurant using a counterfeit EMV chip card after Oct. 1, the restaurant is responsible for that fraud purchase," Higgins says. "We think that watchful waiting is appropriate for many restaurateurs in 2015." Because many restaurants incur little in counterfeit fraud costs, Higgins suggests restaurateurs do the math to calculate whether the cost of buying new EMV terminals or retrofitting their existing POS terminals in 2015 is worth the capital cost. "The No. 1 thing is that restaurants not be frightened into a purchase by a POS vendor," he says. "POS providers often say EMV is mandated by Oct. 1. I would recommend at some point doing it. We assume that by the end of 2017, restaurants will see that the majority of the cards that come in will be chip cards. When this becomes main-stream, then it makes sense to upgrade." Ask yourself, your credit-card processor and POS provider the following questions to help make the right decision for your business:
- What are my current charge-back write offs due to counterfeit cards?
- Can my current POS system be upgraded to support EMV? What is the cost for that upgrade?
- Will the new POS system allow the restaurant to provide table-side payment or counter-based payment only?
- If table-side payment is an option, what is the cost for associated devices? Are they robust? How do they communicate with the POS system? Is there an additional charge for communications from the device to the POS system? Is the communication between the device and the POS system secure? Are there wireless or network upgrades required to use these devices?
- Is the POS system PCI compliant?
- Does the POS system encrypt both EMV and magnetic-stripe transactions?
Want to learn more? Register for the NRA's free webinar EMV and Restaurants: What You Need to Know, Round 2 on April 29, 3 - 4pm CST.