US small businesses finding EMV liability shift ‘overwhelming’

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A gift shop owner told Congress on Wednesday that making the change to chip-and-signature credit cards has been “overwhelming” for many small businesses and that owners are disappointed that without PINs they are being pressured to make an expensive investment without receiving the full level of security that could be provided.

“The EMV transition is overwhelming and expensive for an independent, small retailer,” Keith Lipert, owner of The Keith Lipert Gallery, a single-location, three-employee store in Washington, said. “Small retailers are entirely at the mercy and whims of the big players.

“We have no say and no way to use the marketplace to make our objections heard and our concerns valued.”

“EMV is all new to me, and banks and the networks are not contacting small businesses to help the transition in any way,” Lipert said. “No one from my bank, processor or existing supplier even contacted me about the need to add a new EMV device, let alone a deadline by which to do so.”

Financial fallout

Lipert testified today on behalf of the National Retail Federation before the House Small Business Committee during a hearing on how Europay MasterCard Visa cards will affect small businesses.

The hearing follows this month’s deadline set by the card industry for merchants to install chip-card readers or face increased fraud liability if a chip card is used in a non-chip reader.

Lipert said a key concern is that the EMV cards being issued by banks in the United States are chip-and-signature cards rather than the chip-and-PIN cards used in virtually all other countries where EMV cards are used.

He cited Federal Reserve statistics showing that using a secure, secret personal identification number to approve transactions is seven times more secure than an easily forged and often-illegible signature.

High expectations ‘extremely frustrating’

“We find it extremely frustrating that the card industry expects retailers and other businesses to upgrade when it will not allow the U.S. to adopt the most secure form of this technology – chips with PINs,” Lipert said.

Lipert said small businesses in particular are seeing “significant delays” in obtaining chip card readers or getting them certified once they are installed.

“Small business updates are simply not a priority for the hardware manufacturers, the software providers or the certification entities,” he said.

“I asked my payment technology rep when I could expect new devices if I ordered it this month and was told the equipment is on backorder.”

With each chip card terminal costing as much as $2,000 when installation, software and other expenses are included, Lipert said the price is “extremely high.” And without PIN, “it makes little sense in any serious customer protection or basic return-on-investment analysis.” 

No protection for lost or stolen cards

While the chips make the cards more difficult to counterfeit, Lipert said they do nothing to protect lost or stolen cards, while a PIN alone could prevent all three types of fraud.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. 

Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans.

Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. 

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