Everything You Need to Know About Chip and Signature Payments

It’s already the preferred payment method in other parts of the world, but chip and signature is finally edging out traditional swipe payments in the U.S. Most SMBs are already on board the chip and signature train. In fact, Visa reports that 99% of payments in March of 2019 were of the chip-and-signature variety. What’s the reason for the shift?

Well, first of all, chip and signature payments are more secure. Chip and signature payments provide small businesses with next-level payment security. Let’s talk about how, and review new laws that make adoption essential, how to roll out chip and signature in your business and troubleshooting strategies to use when the ole POS system won’t process your customers’ chip transactions.

Chip and signature payments: an overview

There are many names used to refer to chip and signature payments. They’re also known as EMV cards, smart cards, chip cards… and the list goes on. So, what’s with the acronym? “EMV” refers to Europay, Mastercard, and Visa––the payment companies behind the chip-and-signature movement. (Far be it from a megabank not to take credit where they can, am I right?) EMV chips can only be used for card present transactions at a physical card reader or POS station, since that’s where customer data can fall into thieving hands.

Now for a little history. The shift towards EMV payments began in 2011, fueled by merchant concerns over retail shrinkage. Chip technology helps reduce fraud by 76 percent over traditional swipe payment methods. It’s not rocket science, exactly. The microchip used in chip payments just encrypts a unique data code for each transaction, in contrast to swipe cards where the entirety of each person’s data is contained in the card’s magnetic stripe.

Why you should accept them 

Offering your customers increased data security is the first reason to accept chip and signature payments. Swipe payments run a high risk of fraud. In November of 2018, the U.S. Secret Service seized around 30 fraudulent credit card skimmers holding stolen data from an average of 80 cards every single week.

The second reason to accept ye olde chip payments is that most cards issued today have a chip and signature option. EMV has become a gold standard in the payments space: you’ll be expected to have it, customers will be frustrated if you don’t. But, perhaps most importantly, fraud liability shifts to your business if you aren’t EMV enabled. I’m not kidding. It’s called the EMV liability shift. Let’s deconstruct how this situation came to be.

Most payment networks in the U.S. implemented an EMV liability shift in 2015. The shift essentially removed liability for fraud in card present transactions from the card network and shifted it to the retailer if they don’t use an EMV-enabled device. The laws continue to be updated, increasing the amount of responsibility that falls on the party (usually the merchant) that is the least EMV compliant. Most card networks are pushing back the next round of regulations––once set to be rolled out earlier this year––as a result of the coronavirus outbreak.  It’s important to keep an eye on this…doing a little research now can save you a ton in legal fees and payouts down the line.

 Chip and signature VS chip-and-pin

While it may sound like mere semantics, there’s actually a big difference between chip and signature and chip-and-pin transactions. Yes, most credit cards have pins. Chip and pin credit card transactions are becoming more common, as the unique pin code creates more secure transactions than credit card signatures­­ (which can be forged). Chip-and-pin verification is most commonly used with debit cards. But there’s always the option for customers to run their debit transactions as credit to purchase items using a signature instead of entering a pin code at checkout.

Chip-and-pin transactions are the preferred payment method outside of the US, but we are slowly catching up to other countries. It’s becoming more common for retailers to request a credit card pin or debit card pin instead of asking for a signature. So, if you want to seem like a forward-thinking retailer that’s on top of your game, you’ll want to get a card reader that allows customers to make purchases using a pin code for more secure transactions.

 How to implement chip and signature payments

It’s not free to implement chip and signature payments. It takes an upfront investment in equipment and software, which is why so many U.S. retailers have stalled on rollout. But because of the EMV Liability Shift, waiting too long to implement chip and signature payments can result in a lot of unforeseen expenses down the line. 

Are you ready to bite the bullet and optimize your stores for chip and signature payments? Let’s go over what you’ll need to get it done.

The necessary equipment

An updated credit card reader is the only physical product you need to begin accepting chip and signature payments in your store. If you accept EMV payments on a dated terminal or card swipe machine, you run the risk of the payment not processing correctly. When your card reader doesn’t register chip payments the right way, the customer may need to run their debit card transaction through as “credit” –– which often comes with higher payment processing fees­. So, while a decent EMV-enabled card reader will usually run you around $200, it’s the old “you’ve gotta spend money to make money” type of situation.

*Beware of credit card processors that offer “free” card readers or terminals. You’ll usually wind up paying for them tenfold in shady hidden charges once you sign a software contract.

 The necessary software

 Like with any type of card-based payment, you’ll need a reliable payment processing software solution to start accepting EMV transactions. For some retailers, such as gas stations, there still aren’t a lot of available software options for EMV compliance––and this, along with lagging EMV Liability Shift regulations, is why so many gas stations are late to the chip payment party.

Payment processing fees are often complex and hard to quantify. Do your research and run the numbers to determine whether you’re using the most cost-effective payment processing software for your business.

How to troubleshoot: Chip and signature not working

To process chip transactions, your chip card reader has to encrypt a unique transaction code, send it to your customer’s bank for verification, and receive confirmation that they have the funds. It’s a lot of activity in a short amount of time. And if you don’t have an up-to-date terminal, chip transactions can cause processing delays which lead to long lines and dissatisfied customers.

If you want to speed up your transaction times, look to a payment processing provider with competitive hardware offerings, such as Payment Depot.  With Payment Depot, you can choose from a wide range of modern chip readers and terminals to prepare your small business to accept EMV transactions. 

Payment Depot also has a team of award-winning in-house customer service that are accessible 24/7. So, if you have an issue with your software or card reader, you can immediately connect with a knowledgeable customer service rep who can take you through it, step-by-step. Reach out today to discover how Payment Depot helps merchants like you save an average of $400 a month on credit card processing to take your customer payment options to the next level… without the expense.