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| What Chip and PIN Smart Credit Cards Mean for Merchants Posted: 05 May 2011 02:00 AM PDT Credit card technology continues to become more advanced and secure as electronic theft gets more and more complex. The ability to accept credit cards for business is critical to improving customer service and profits, yet security must be a top priority whenever a merchant is swiping cards for transactions. Or, with recent changes ahead for Canadian merchants, the more accurate term is now "dipping" Chip and PIN cards for transactions.
Chip and PIN credit cards involve a new embedded microchip technology that replaces the traditional magnetic swipe credit card. Instead of swiping the card through the terminal, merchants "dip the chip" by inserting the card's microchip into the terminal while the cardholder enters a secure PIN. Following the success of Europe's recent migration to all Chip and PIN technology, Canadian merchants are now required to make the switch for enhanced security and more efficient credit card processing. By 2015, magnetic stripe cards will no longer be accepted at the point of purchase for Canadian businesses. So what does this mean for Canadian merchants? As Chip and PIN credit cards make their way into Canadian businesses, merchants must fully understand how the new system works, the new technology's benefits, and the proper steps to implementing Chip and PIN technology. How Chip and PIN Smart Credit Cards Work When it comes to processing Chip and PIN smart credit cards, not much changes: the cardholder presents the credit card to the merchant, the merchant captures the account information from the card, then sends it to the card-issuing bank for approval and through a secure payment gateway to safely transfer funds. The main difference between the Chip and PIN and traditional magnetic stripe credit cards is how the account information is stored within the card and captured by the merchant. While the stripe is swiped through the magnetic stripe reader, the Chip and PIN's microchip is inserted (or "dipped") into the terminal and remains there through the duration of the transaction. The customer then enters a secure PIN, which replaces the signature formerly used to verify the cardholder. A few tips and considerations to keep in mind when dipping the chip:
The Benefits of Chip and PIN Technology The main driver behind the development of Chip and PIN technology is security. The United Kingdom first introduced Chip and PIN credit cards as a response to rising credit card fraud caused by stolen cards, forged signatures, credit card skimming and electronic theft. Chip and PIN technology reduces these risks, making credit card duplication extremely difficult and replacing signatures with secure PINs. With enhanced security behind merchants' credit card processes, customers can feel safer when dipping the chip for purchases. In 2006, the year the Chip and PIN went into full effect in Europe, Visa Europe reported that fraud was reduced by $36 million. Malaysia credit card companies also reported significant drops in fraud at the point of purchase after adopting the Chip and PIN in 2005, including an 84% drop for Visa during the first six months of implementation and 90% for MasterCard during the first five months. In addition to improved security, Chip and PIN offers faster authentication processes and speedier checkouts, as entering a PIN is two to four seconds faster than signing a name. Making the Switch to Chip and PIN For Canadian merchants, implementing the right Chip and PIN system begins with speaking to a Canadian merchant account provider that offers Canadian and Chip and PIN processing capabilities. Different merchant types require different equipment; for example, restaurant merchants may want to upgrade to wireless Chip and PIN terminals, which allows wait staff to process credit cards at the cardholder's table. Eliminating the need to swipe the credit card away from the cardholder prevents card skimming and minimizes fraud, while improving customer convenience and service. Once the right Chip and PIN technology is in place, merchants must train their employees to correctly use the equipment. The switch should be simple for the most part, as most businesses already require PINs for accepting debit cards in Canada. However, the training process should still be thorough. During the transition period, employees may be presented with both magnetic stripe cards and Chip and PINs, and they will have to recognize which is which and be able to identify the proper processing procedure for each. While the Chip and PIN helps to enhance credit card security, Canadian merchants must still follow advanced security precautions in order to protect customer data and business. After all, merchants are now liable for compromised data, and a security breach can lead to a loss of customers and a loss of business. In addition to Chip and PIN technology, Canadian merchants should be sure to use advanced encryption methods to keep credit card numbers safe, and to avoid storing unnecessary credit card information. Even simple fixes, like changing default passwords and settings, can mean the difference between a secure business and a business highly at risk. Credit card processing has come a long way in recent years, with products like wireless, mobile and e-commerce technology dramatically improving business. Merchants must keep up with advancing processes if they wish to provide their customers with the highest levels of service and security. The Chip and PIN is a big step toward safer, more efficient transactions, allowing merchants to focus on the core of their business. Author Bio: Jacqui MacKenzie is a writer for Straight North, a premier Chicago Internet marketing agency that works with BluePay, a leader in small business credit card processing solutions. Related Posts:
What Chip and PIN Smart Credit Cards Mean for Merchants originally appeared on Canadian Finance Blog on May 5, 2011.
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