Getting small businesses ready for credit-card changes

For Juli Ghazi, upgrading the card-accepting payment system at her Pure Pizza locations wasn’t just about her business, but about her customers, too.

Early on, her uptown 7th Street Public Market location depended on public Wi-Fi to run the payment-processing system.

She worried about security. And she also knew businesses faced an Oct. 1 deadline to adopt new card readers that can accept credit-and debit-cards with more-secure chip technology.

By the time she opened her Central Avenue location recently, she had an upgraded payment system at both places.

“They trust me to come into my business, use their credit cards...I needed to go to a more secure platform,” said Ghazi, a speaker at a panel discussion last week on what the new chip cards mean for small business.

Chip-bearing cards, designed to be harder to counterfeit, are on their way to consumers now. Businesses of all sizes are expected to be ready soon to accept the cards for purchases -- or else face possible consequences.

Here are five points raised at the forum that are of particular interest to small-business owners:

What’s the significance of Oct. 1?

That’s when businesses – instead of credit- and debit-card issuers – are on the hook if there’s any counterfeit fraud on cards with chip technology. This is the date set by major card companies, including MasterCard and Visa.

If a payment system can’t process the chip, “you as a merchant may get a charge back for that from the issuer,” according to forum speaker Stephanie Ericksen, vice president risk products for Visa Inc.

Payment systems that only read the traditional magnetic strips on cards won’t suddenly stop working.

Recent surveys, including one by Wells Fargo, show many small-business owners aren’t aware of this deadline, which banks and card issuers call a “liability shift.”

“Smaller businesses (and) people that run them are focused on their business, what they do best,” said speaker Derrick Carpenter, senior vice president, Bank of America Merchant Services. “So a lot of times, payments and technology can kind of come to the side.”

How does the technology work at an updated point-of-sales system?

After a customer swipes a card, systems that read chips will redirect the customer to dip the card instead to read the chip.

With chip cards, the number on the front of the card is identical to the one in the chip, Ericksen said. There’s also a one-time code that changes with each transaction.

What types of costs are involved?

Referencing Bank of America’s Clover system for merchants, Carpenter cited a range from $35 for a mobile solution, to up to $1,500 for an in-store system.

There are free equipment options. Mobile-payment system Square is giving away 250,000 chip readers while they last. They are typically $49.

Other costs could be involved, including monthly fees to use a particular system. Monthly fees for the Clover system range from zero to $49, according to the bank.

What type of system is right for me?

That depends on your type of business, Ericksen said.

Places that see lots of repeat customers -- such as hair salons, dry cleaners and coffee shops -- are less likely targets for fraud, and may not need to invest as much as other places.

“Most of the counterfeit fraud we see today is where you would expect people to want to go with a fake card, which is electronic stores, luxury goods, places where they can get something which is of high value and sell it to get the money,” she said.

Also vulnerable: high-traffic tourist destinations that have a lot of customers who will never come through again, and places that sell prepaid cards. Criminals will make counterfeit credit cards and use them to buy several prepaid cards, which can then be converted into cash, Ericksen said.

Also consider what your business needs are, Carpenter said.

“Are you a micro-merchant, or do you actually need a little bit more support,” such as a system that also tracks inventory in addition to taking card payments.

Will this fix all credit-card fraud?

No. Chip technology doesn’t cover all types of card uses, such as transactions performed over the phone. Speakers said they expect fraud to move to other areas like this as merchants step up their in-store technology.

Plus, Oct. 1 is more like a starting point, speakers said. The expectation is that not all businesses will be ready with new card readers.

Said Carpenter: “We think this is going to be another 24-month process to upgrade the whole marketplace.”