A chip-enabled credit card, inserted into a store's reader. Credit: Zach Miners
The nation's retailers bear a huge share of the burden of converting to more secure chip card technology, even as banks have been shipping updated chip credit and debit cards to millions of customers for months.
On Thursday, retailers of all sizes must have inew payment terminals installed in their stores, restaurants and hotels. If they don't meet the Oct. 1 deadline set by banks and card companies, they will then incur all the financial liability for fraud with cards using older magnetic stripe technology.
Yet, only about half of the nation's 12 million payment terminals will be upgraded by Thursday, according to analysts and financial experts. With new payment terminals costing up to $600 apiece, it has been a massive and expensive conversion.
"October 1st snuck up so quickly," said Curtis Picard, executive director of the Retail Association of Maine, in an interview. "It's organized chaos, a little, right now."
There are about 9,000 stores, restaurants and other retailers in Maine, some with hundreds of payment terminals. Picard couldn't say how many have been converted to accept chip cards, which contain an embedded computer chip that hardens protections for a 16-digit card number, the user's name and the card's expiration date. Analysts said the situation in Maine is fairly typical of the rest of the nation.
"If you're not upgrading, you are accepting liability for fraud, but the cost of $300 to $600 per terminal is burdensome, especially for a small retailer," Picard said. "The benefits of the liability shift seem too great for many."
Picard said he personally believes that avoiding the liability is worth the added cost of installing the new terminals. He said some Maine retailers are facing the looming deadline with a tinge of anxiety. "Summer has come and gone and they say, ' I better get going' " on converting. "That's the situation we're hearing."
Visa, MasterCard and American Express have been shipping new chip cards to millions of card users for months. On Sunday, Visa said that the Oct. 1 date should be viewed as a starting point, not an end state, for the conversion. Card issuers first began planning the conversion in late 2011, when the U.S. was far behind Europe, Canada and other countries in adopting more secure chip cards.
Visa and others have said it will take another two to three more years before up to 70% of transactions are made at a chip terminal, and possibly four to five years to reach 90%.
"The October 1st deadline is like having cold water splashed in your face for retailers, even though the card companies and the banks are all painting this rosy picture about the conversion," said Avivah Litan, an analyst at Gartner. "Well, it's not so rosy. People are not telling all the details of the chaos in the background."
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