Everything You Need to Know About Chip Cards (and Why You Should Accept Them ASAP)

Seventy percent of consumers now have EMV chip cards. So if you're not set up to accept them, your business is officially behind. But beyond making you seem outdated, not accepting chip cards could have more serious implications for your business. Read on to learn everything you need to know about chip cards—and why it's so important that your business start accepting them ASAP.

THEY'RE MORE SECURE.
Almost half of the world’s credit card fraud happens in the United States—even though only a quarter of all credit card transactions happen here. This is largely due to the fact that the United States was one of the last markets to hang onto magnetic-stripe cards (which are vulnerable to cloning) as the credit card processing standard. Other countries, including Canada and most of Europe, have been using chip cards for years, and have seen a dramatic decrease in fraud as a result.

Why exactly are magstripe cards subpar when it comes to security? Because the data (meaning your bank details) on the back of the card is static. This makes it relatively easy for even unsophisticated fraudsters to lift and then clone the information onto a new card (and then go on a shopping spree). Chip cards, on the other hand, are dynamically encrypted. That chip in the corner is actually a tiny computer chip, which scrambles your bank information at the point of every transaction to make it extremely difficult for fraudsters to extract anything meaningful.

THE LIABILITY SHIFT IS NOW IN PLACE.
Aside from the fact that chip cards are much more secure than magstripe cards, there's another reason your business should accept them: the liability shift. Under the liability shift (which went into effect in October 2015), businesses that aren't yet set up to accept chip cards could now be on the hook for certain types of fraudulent transactions. So to protect your business from unwanted charges, you should get set up to accept chip cards as soon as possible.

CHIP CARDS ARE PROCESSED DIFFERENTLY.
Chip cards are dipped instead of swiped, which means you need a new POS to accept them. And as opposed to magstripe cards, they're inserted into the reader for the entirety of the transaction (that's when all the security checks are at work). Unfortunately, chip cards can be a bit sluggish to process. They take noticeably longer, in fact, than magstripe cards. While this is all in the name of security, it can be a bit of a drag if you have a long line. That's why it's a smart idea to get a POS that can accept NFC payments like Apple Pay and Android Pay in addition to chip cards. NFC mobile payments are just as secure as chip card payments but are leagues faster to process. They're near instantaneous. They're also a lot more convenient for customers, as it all happens through their mobile device (which they likely have in their hands anyway).

IT DOESN'T HAVE TO BE EXPENSIVE TO ACCEPT CHIP CARDS.
For small businesses, getting set up with EMV terminals can indeed be expensive. On average, it costs between $500 and $1,000. However, there are more cost-effective options, such as Square's contactless and chip reader, which is just $49 and doesn't require an extensive setup process. It works directly with the mobile device you already have, so there's no need to go out and buy a bunch of other expensive hardware to get set up.

This blog was sponsored and written by Square. To learn more about the Square and ClassPass partnership, please click here. Contact Spencer McCluskey at spencerm@squareup.com with any questions relating to Square.