Make the Switch to New Payments Technology

By SBA Administrator Maria Contreras-Sweet and Square CEO Jack Dorsey This October, America will take a major step to mitigate fraud and improve our financial security by migrating away from outdated credit and debit cards that transmit sensitive customer data using magnetic stripes. In 2015, it should not surprise us that a system using essentially the same technology as cassette tapes is especially vulnerable. That is why major credit card companies, lenders, and businesses are now embracing new, more secure, authenticated payment technologies. Many consumers already have credit cards embedded with microchips in their wallets, and many more will be receiving these cards in the coming months. This technology – also known as EMV (Europay, Mastercard, Visa) – is a safer form of payment for buyers and sellers alike, as the cards are nearly impossible to counterfeit. EMV is not the only payment shift on the horizon. Because reading chip cards takes more time than reading magstripe cards, we expect increased adoption of faster, contactless options, such as Apple Pay and Android Pay. This technology allows a consumer to pay with a smartphone by using a phone linked to their credit card. It is fast, safe, and convenient. The shift to new technologies and authenticated payments is important because we have a sizeable fraud problem in the United States. According to data from The Nilson Report and BI Intelligence, the U.S lost seven billion dollars to credit card fraud in 2013. That is more than the fraud loss sustained by the rest of the world combined. Credit card fraud losses in the U.S. are disproportionately high because chip cards are already the norm in most nations. Roughly 90 percent of credit card terminals in Europe are now chip-enabled. The United Kingdom has seen nearly a 70 percent decline in counterfeit card transactions since making the transition, according to Barclays. U.S. credit card companies have set October 1 as the date for the national adoption of chip cards here at home. On this date, there will a “liability shift.” Businesses that have not acquired the technology to process chip cards will become financially responsible for certain fraudulent transactions previously covered by the cardholder’s issuing bank. We need to make sure that small businesses are not left in the dark or on the hook. The U.S. Small Business Administration (SBA) and Square are working to help small businesses get educated and prepared for the transition to come. We are tapping into our millions-strong combined network of business owners to get the payment security message out at events across the country and online (more information is available at http://www.sba.gov/emv). Read more at sba