This year, estimates suggest that there are more than 4.8 billion chip payment cards in circulation around the world. That number has skyrocketed by 1.4 billion since 2014. And that number will just keep on climbing.
If you don’t yet have a credit card machine with a chip reader for your business, read on. We’ll cover everything you need to know about why you need one and how it will affect your bottom line.
How Do Chip Card Readers Work?
Credit cards with a chip in them are called Europay, MasterCard and Visa – or EMV for short.
They have a small circuit in the card. The chip provides the payment data instead of the magnetic strip which was the norm in the past.
However, merchants need to upgrade their point-of-sale terminals in order to accept chip cards. As a pair, the chip card and the upgraded POS terminal work together to prevent counterfeit fraud.
Visa reported that from December 2015 to September 2017, in-store card fraud went down by 70%. That huge drop is no coincidence. During the same time period, the number of merchants that accept chip cards reached 2.7 million.
How is a Credit Card Machine with Chip Reader Safer?
Chip cards are almost impossible to counterfeit. That alone is one deterrent. Secondly, chip cards have encrypted data that changes for each transaction.
When a customer inserts a chip card into the credit card machine, the chip creates a transaction code that authorizes that purchase.
If a hacker gathers the data from a point of sale transaction, it will be useless. The data can’t be used for another transaction. Any transactions with a used transaction code will be declined.
The information from the card also does not help a hacker create new cards since the transaction code can’t be used again.
The Result of Chip Cards in Europe
In Europe, chip card technology has been around for several years and chip card readers have become the norm.
As a result, fraud has dropped by 67% in the UK in the past 10 years. Canada was also an early adopter of the technology and has seen a comparable decline in fraud.
In the US, on the other hand, fraud has doubled since 2007. It seems the hackers who were stopped by chip cards in Europe and Canada turned their attention to the States.
So why should individual businesses foot the bill of buying and installing credit card machines with chip readers? Here are a few reasons why it makes sense.
It’s Convenient for Customers
Everyone knows that good customer service goes hand in hand with customer convenience.
Having a credit card machine with a chip reader makes it easy for customers to pay for their purchases. Customers don’t need to sign a receipt or even sign a touchscreen.
Instead, after inserting their credit card into the PIN pad, some customers will input their 4-digit PIN. Not all banks require a PIN at this time, but in the future more banks will require the PIN at time of transaction. This makes point of sale transactions much more streamlined and convenient for customers, as well as knowing their transactions are secure.
It’s Convenient for Merchants
Having chip card readers gives merchants a new level of flexibility. For example, retail stores could give customers more options to pay for their purchases besides at the cash register.
Some businesses are allowing in-aisle options by using pocket-size chip readers that sales associates carry around. If you don’t have a brick and mortar location, chip technology lets you do business from virtually anywhere using any device.
Learn more about mobile phone processing here.
Customers Expect it
Not only is having a chip reader more convenient, many customers these days are now expecting it.
As of September 2017, Visa saw a 542% increase in EMV cards in the US. That equals 462 million cards in active use. This doesn’t account for chip cards from Mastercard and other companies.
With so many cards out there with chips, customers are starting to expect it. If given the choice, customers would rather use their chip than their magnetic stripe.
Over 2.5 million merchants offer chip reader for their POS transactions. That means that if your organization isn’t offering it, you are lagging behind the rest.
And being seen as behind the times can hurt your reputation and rapport with your customers.
Protect Yourself from Fraud
And of course, one of the most important reasons why it’s smart to make the change to chip card readers is to protect yourself from fraud.
All the big names including Visa, Discover, American Express, and MasterCard have made it clear that as of 2015 all merchants will be held liable for any counterfeit fraud that occurs in their stores. This is regardless of whether you have chip card readers or not.
In other words, you are going to take the fall for any fraudulent purchases no matter what. But if you are not using chip card readers, you are more likely to be a target since hackers can’t easily defraud organizations with chip card readers.
As more and more organizations make the switch to credit card machines with chip readers, the bigger target the remaining swipe card users become for hackers.
If you are wondering if your business can afford to change out their POS to get chip card readers, the better question might be can you afford not to?
Yes, changing out your existing POS system for credit card chip readers comes with an initial expense that isn’t by any means cheap.
Yet, in the long run, you will be saving money by making the chip upgrade. Counterfeit fraud dollars dropped by 66% in just one year for merchants that made the change.
In as little as a year, your chip readers could pay for themselves in saved revenue.
Thanks for reading! We hope you found this post about credit card machines with chip readers informative. If you’ve been unsure about making the switch to card readers, hopefully, this post gave you some solid reasons for making the change.