Surviving the switch to EMV

We’ve all heard the warnings: keep your credit card information safe. Don’t let anyone see you punch in your PIN. Be smart about where and how you swipe that card. Otherwise, identity thieves can take you for a ride.

Fortunately, banks and credit card companies have been expected to reimburse victims of credit card fraud in the past.

That is changing with the onset of the EMV system. EMV (Europay, Mastercard and Visa) is a new transaction processing technology designed to cut down on fraudulent credit card purchases by installing micro-processing chips into credit and debit cards. Oct. 1 was the deadline for retailers to equip their operations with EMV-capable sales terminals. Those who fell short of the deadline could face shouldering the financial and legal burdens of any purchases via stolen credit cards or information.

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EMV-enabled terminals can be obtained through several third-party providers, including point-of-sales systems vendors and credit card companies. Robert Hendrickson, who recently launched marketing and communication consulting firm Next New Planet, says many garden retailers scrambled to update their equipment before the shift in fraud liability, while others continue to do so.

“The garden centers are having to chase down some of the POS systems and get their equipment quick enough,” Hendrickson says. “I thought maybe they’d be more proactive. They all know what’s coming, they all know they need to comply, but they were hoping that their POS companies would be a little more proactive in helping them get ready.”

EMV cards and readers differ from the familiar magnetic strip technology, which enabled customers to complete their purchases with a quick swipe. An EMV card must be left in the reader for the duration of the transaction, says Ralph Moore, manager of inside sales with the Lawn and Garden Dealers Association.

“The terminal doesn’t work any differently once you put the card in,” Moore says. “You just put that amount in and hit enter, but you have to leave the card in the terminal until the transaction is complete. If you don’t do that, you will interrupt that transaction. I’ve seen them work and it’s really not that much slower.”

In any event, Hendrickson thinks the new EMV standards and technology are requiring adaptation on the part of both retail staff and customers.

“It’s a new sort of habit, and habits are hard to break and hard to start,” Hendrickson says. “I think, as a society, we’re all used to swiping [a credit card] and putting it back in your wallet. I’m thinking this is going to be a learning curve where people are going to stick [their card] in the machine, forget it and walk away.”

Amy Draiss, office manager of Dayton Nurseries in Norton, Ohio, No. 68 on our 2015 Top 100 list, says the switch from magnetic strip to EMV chip has been relatively simple at her business, though personal preferences among staff have yet to catch up to the new standards.

“I would say most of us got adapted to it very quickly, and I noticed customers are getting adapted to it quickly as well,” Draiss says. “Most of the customers do seem to understand the change and what needs to be done, [whether] they have a chip card or not. The problem is with the employees, they just don’t like the change. That’s definitely something I’ve noticed.”

Other businesses are still waiting on credit companies or POS system providers to deliver the needed hardware and software to fully make the switch to EMV. Ross Prentice, store manager at Morrison’s Home and Garden in Plymouth, Mass., says his store was equipped with the necessary chip readers as of mid-October, but was he still waiting on the necessary software to complete EMV transactions.

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“The credit card machines we have already have the fob to swipe your chip, so there’s no hardware changes or anything,” Prentice says. “It’s just that once the software is updated, we can start using it. We’re just waiting for that to come through. They told us it’d be a week to 10 days before it would be ready.”

Prentice says he is not particularly concerned that the primary difference between magnetic strip cards and EMV chip cards — the requirement to keep the card in the reader throughout the transaction — will be a major obstacle for customers or staff.

“That’s the learning curve,” he says. “It’s not a big change [other than that]. It doesn’t seem like a big enough thing to cause too much of an issue.”

Processing an EMV purchase works by opening direct communication between the card reader and the credit card company. Moore says this cuts down on credit card fraud by randomizing codes and making card data less valuable to thieves, as each stolen card can effectively only be used once.

“When a person walks in with a stolen card, they’ll be able to use it once, but every single time that you swipe that card, the code changes,” Moore says. “Therefore, if somebody breaches a system and all those cards are EMV microchipped, then that person selling all those card numbers … who’s going to want a card they can only use once? That in and of itself is going to cut down tremendously on the amount of fraud somebody can commit.”

However, the EMV chip is only designed to prevent the use of counterfeit credit cards, and does not prevent thieves from using lost or stolen EMV chip cards and forging a signature, according to a statement from the National Retail Federation. The chip’s security can be enhanced by a personal identification number, or PIN. The NRF is in favor of PIN codes becoming standard alongside the new EMV chips.

“The chips partially address the issue of counterfeit cards, but do nothing about lost or stolen cards because thieves will still be able to sign any illegible scrawl to ‘prove’ that they are the cardholder,” says Mallory Duncan, NRF senior vice president and general counsel. “More importantly, sophisticated criminals can circumvent the chips, so a chip alone is not foolproof. A PIN is a secret password that makes the card useless to a criminal whether the card has a chip or not.”

...sophisticated criminals can circumvent the chips, so a chip alone is not foolproof. A pin is a secret password that makes the card useless to a criminal whether the card has a chip or not.” — Mallory Duncan, NRF senior vice president and general counsel.

EMV technology has produced some tangible success at reducing credit card fraud when implemented broadly. Since Europe completely converted to EMV technology, the continent has seen an 80 percent decrease in credit card fraud, while the United States has seen a 47 percent increase, according to a 2013 report by Discover Financial Services.

However, some have questioned whether or not credit card fraud is a serious issue at garden center retailers. Hendrickson says this question was raised at the September Garden Center Group Fall Event in Orlando, Fla.

“This topic came up and one of the guys said all this change and concern for us is trying to fix a problem that doesn’t exist at our store and probably even in our industry, it’s so small,” Hendrickson says. “I felt that was a really good snapshot, that it’s probably not as big of an issue as it is in other kinds of retailers. We may be playing along with trying to fix a problem that we don’t have.

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“[Fraud] happens in odd places, so I guess we’ll just have to play along with the rest of the retail world.”

Although fraudulent credit card purchases are largely uncommon at garden retailers, Draiss says that the possibility should not be discounted. She adds that the adoption of EMV has not been as rapid or as widespread as she had expected.

“It’s definitely one of those things we have to roll with,” Draiss says. “It’s possible because we were housing that credit card information on our own server here at the nursery, so if it got hacked into, it’s possible. We had to change anyway, you might as well move to the latest technology. I’m definitely not noticing it as much as I thought I would, I thought everyone would change by now.”

EMV is far from the first widespread new technological standard to hit the retail world and chances are it’s far from the last. As with other new waves of technology, the informed, proactive and organized businesses will eventually be made better for the adaptation.