Valentine’s Day is the deadline when all chip and PIN card users will have to use their pin number instead of a signature. If you accept credit cards and have not yet converted to the new system you need to act quickly. Regardless of whether your point of sale equipment is supplied by your bank, you own it yourself, or even if you are not planning to implement the new system at all there are important issues to consider and business could be lost.
Figures show a 29% drop (£36 million) in the amount of fraud taking place on lost, stolen or counterfeited cards in the first six months of 2005, compared with the same period last year. The chip in the card is difficult to counterfeit or copy and the use of an individual personal identification number makes it harder for a criminal to use a lost or stolen card. Apart from slashing fraud, chip and PIN can cut administration costs and it is quick to use. Merchants no longer need to check a cardholder’s signature, or store vouchers for these types of transactions. Chip and PIN does not affect backed processes so there are no changes to settlement procedures and timescales.
If you are a business with bank-owned terminals, the bank should have sent you new chip and PIN equipment and you should be using it. All you need to do is publicise the February. Anyone can tap in www.chipandpin.co.uk and you can download card scheme logos, counter displays trolley and basket inserts, floor posters, customer leaflets etc. Produce as many as you need, but check Usage Guidelines which set out how you may use the material.
If you actually own your point of sale equipment and haven’t switched, you don’t have long to make changes. It can take small businesses three months to implement the system (large organisations take double that time). Your own point of sale equipment may need to be upgraded to read the information held on the chip and enable cardholders to enter their PIN via the keypad. Speak to hardware and software suppliers. There are many solutions to choose from and suppliers are constantly introducing new products. Also talk to your acquiring bank to find out which suppliers they regularly work with. Costs will vary so shop around. Don’t delay installation. All staff at point-of-sale need to be confident using the new technology and answering customer queries so makes time for training.
Some businesses may decide to opt out of chip and PIN altogether. This may appear to save short term costs, especially if there is a low level of plastic card transactions, but in the long term it is risky. Firstly there is the liability shift for card fraud which could have been prevented by chip and PIN to the party which has not upgraded. Secondly, it is highly likely that fraudsters will target retailers who have not implemented chip and PIN. And finally, the sophistication of chip cards means they can support add-on services such as retailer loyalty cards. Ninety per cent of customers now use chip and PIN and may see your business as old-fashioned if you don’t.
Mail order, telephone order and internet transactions are not yet covered by chip and PIN, but there are several initiatives that help address security for these types of transactions. They include Address Verification, Security Code checking and, for Internet transactions, Verified by Visa and MasterCard Secure Code. Eventually chip and PIN may be used over the internet.
Apart from outlets which don’t yet have the chip and PIN technology, other transactions which aren’t using the system include purchases from cards which have not yet been upgraded, purchases made abroad in countries which have not yet upgraded to the new technology and disabled customers using a chip and signature card who will always continue to sign.
If you accept credit cards you really should have chip and PIN by now. If you haven’t there is still time to upgrade quickly. Remember that doing nothing is the most risky gamble of all. Valentine’s Day is really not that far away.