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Cheap chip card readers are on the way for merchants

Matt Hamblen | July 16, 2015
U.S. banks are steadily shipping more secure chip-embedded credit and debit cards to consumers, but industry attention is also focused on whether merchants have installed updated payment terminals to accept the new cards.

"These cost-effective solutions provide small merchants a quick and easy onramp to accepting new payment technologies such as Apple Pay and chip cards," he said. "I see dual-interface [chip and NFC-ready] solutions as playing a signature role in building out acceptance amongst small merchants who are widely anticipated to be late adopters."

Visa, MasterCard and other companies that provide credit card networks for banks have been pushing for updated chip card technology for greater security. About 3.4 billion chip cards are widely distributed in 80 countries outside the U.S., according to the EMV Connection website. EMV stands for Europay, MasterCard and Visa, the original companies that developed the chip cards.

The Payment Security Task Force, an industry group comprising banks, retailers and point-of-sale device makers, has predicted at least 47% of U.S. merchant terminals will support chip cards by the end of 2015.

Banks and card issuers have set Oct. 1 as the date when card counterfeit fraud liability will shift from banks to merchants, or the party using the least secure technology.

Brodigan said retailers face a risk of liability without upgrading their terminals, but he argued that they also can earn a reward for doing so. With upgraded terminals that support smartphones on NFC, retailers can set up loyalty and rewards programs with customers that could yield better sales and profits.

Brodigan said merchants of all sizes in the U.S. still face confusion about whether customers must produce a chip card to be read by the terminal and also provide a signature or type in a PIN to complete a transaction. With NFC smartphones, there is usually no need for either a PIN or a signature.

The decision on using either a PIN or signature will rest with banks, though some have yet to commit to one approach or the other. Brodigan argued that it's consumers who will determine whether they favor a signature or a PIN.

"Unfortunately, the jury is still out," he said. "Our position is that we want to help merchants support both PIN and signature, but some card readers only support chip and signature."

Square's new reader, meanwhile, connects wirelessly to a smartphone, tablet or a Square Stand device where a customer's signature is taken and not, apparently, a PIN. "The U.S. is a chip and signature market," a Square spokesman declared in an email.

Chip and PIN is the standard for chip card purchases made in Canada, Europe and Australia.


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