There’s a credit card change taking place later this year, and it will require retailers to act. On Oct. 1, all retailers — not just pool and spa store owners — will risk bearing liability for fraudulent card use if they don’t have payment terminals to read new chip-based cards that some customers will present for payment.
This change means retailers must install new equipment before the deadline, as a (hopefully) busy season is wrapping up in many geographical regions.
While these cards already have started circulating to customers, many retailers, even big boxes, haven’t brought new payment terminals online yet.
Pool and spa retailers believe that, while the change is an important one, there’s no need to panic at the switchover or the deadline.
Here, learn about why new cards and readers will be used, as well as how the industry is adapting.
Security solution
The changeover comes in response to growing concerns among retail professionals and consumers about data breaches that put the personal information of millions of consumers at risk. Such incidents at Target and Home Depot have been the most recently publicized.
But it’s also motivated by the rate of U.S. credit card fraud in the larger global landscape. In 2013, the Nilson Report put out statistics showing year-over-year increasing global credit card fraud, topping $10 billion in 2012.
SEE MORE: Benefits of EMV
The new cards being touted as a solution are coined EMV for Europay, Mastercard and Visa, the companies that set the global standard for the technology. This more secure way of authorizing credit card transactions puts payment information on a microchip embedded in the card face.
EMV chip credit cards employ microchip technology and a user’s PIN to help protect consumers and retailers from theft of financial information. The new credit card technology already is common in most other countries: There were approximately 2.4 billion EMV-compliant payment cards in use across the globe in the fourth quarter of 2013, according to EMVCo, an organization of credit-card issuers and other stakeholders seeking to promote use of the technology. That statistic doesn’t include the United States, which only accounted for 0.03 percent of EMV transactions across the globe at 2013’s end, according to EMVCo.
Should retailers be concerned?
Opening the company up to any hint of liability by not changing equipment obviously isn’t the preference of small business owners, but pool and spa retailers facing that October deadline also shouldn’t panic or feel anxious about its approach, industry professionals say.
“We’ve never had any instance, knock on wood, in my 28 years here or our 61 years in existence, of credit card fraud that we’re aware of,” says Dan Lenz, vice president of All Seasons Pools, Spas & Outdoor Living. “My hopes are good that our exposure to the liability is relatively small.”
Many other pool industry retailers have a similar experience as the Chicago-area store: Incidents of fraud are low to non-existent.
While the new chip-based cards boast a microchip technology working with either a user PIN or signature to make the theft of financial information more difficult, there’s no reason to believe that delaying a switch to the new terminals until the offseason would cause more fraud than a pool store already would have experienced. It’s just that the possibility does exist, and that liability would now fall on the business instead of the banks that issue the credit or debit cards customers use.
Retailers must be aware of the issue and the impeding deadline, but also keep perspective, observers advise. The liability issue only occurs with cards that are swiped via the checkout terminal. Cards that are keyed into the payment system — say, for service or construction payments or even Internet purchases — aren’t exposed to the liability shift.
How it works
How will an EMV transaction look to a pool and spa retailer?
An EMV-ready terminal will have the traditional swipe and an additional slot where smart cards will be inserted by the customer.
The process of using the card will be different than the current method. Once the card is inserted, the chip initiates data communication, and the card is left in place during the entire transaction.
“Current consumer habits of swiping the credit card before the transaction is completed will no longer be an option with EMV, because the transaction must be totaled first,” says Rachael Pritz, executive director of North Versailles, Pa.-based RB Control Systems.
To distinguish between the older and newer cards, staff will want to look for the chip, which will be clearly marked on the front of the card.
The professional will instruct holders of chip-embedded cards to insert it into the slot when the terminal prompts. Some cards will prompt for a pin automatically and some will ask for a signature.
The new hardware
Many pool and spa stores that are utilizing popular industry-specific point-of-sale systems haven’t yet replaced their equipment. Before they can install new payment terminals designed to accept the chip-based cards, the POS software needs the ability — in other words, an update.
“RB Control Systems is currently installing a new payment application that is capable of accepting EMV cards,” Pritz says. “The retailer will need the PIN pad that accepts the chip and PIN cards.”
For all stores, that means installing new hardware. The magnetic card stripe readers don’t have — and can’t have — the capability to read EMV cards.
“From what we understand from Sterling Payment Technologies, which currently provides our credit-card processing equipment, this is something they will be providing to us retailers,” says Steve White, owner of Underwater Pool Masters, in West Boylston, Mass. “As with most technology changes, there will likely be a cost associated with it. Hopefully it won’t be too significant.”
Research done by PSN shows a wide range of hardware at price points as low as $130 to nearly $500 per terminal. Depending on how many terminals a retailer plans to replace, that cost could take some consideration. Square, the maker of a payment reader for mobile devices, offers a chip payment solution for $29.
One point a retailer should look for in the replacement hardware is that it interfaces with the business’ current POS system.
“The devices are encrypted so they actually will be coming from the processor,” Pritz says. RB Control Systems’ customers can contact the company to order new hardware and receive the POS update.
Vancouver, Wash.-based Evosus Business Management Software customers also will have a solution in place before the fall deadline.
“We’re working with our payment processing partner, OpenEdge, to develop an EMV/Chip and PIN solution for our dealers that will also add additional payment processing functionality to the Evosus software,” says Christina Braks, vice president of software products for Evosus. “We will be communicating with our clients as we get closer to developing the new solution in regards to hardware and software requirements and what this means for the dealer.”
Of course, the more terminals a retailer has, the more time is needed to make the transition. At Payne Pools & Spas, with three locations serving the Greater Washington, D.C. area, seven magnetic-stripe terminals will need to be replaced at its Culpeper, Va., location alone.
“In similar situations, we have had to take a day or a couple of days to transition everything over where we’ve had to either close or severely limit our functioning,” says Michael Johnson, store manager of the Culpeper store. “... It’s something we’re preparing for and hoping we don’t have to do [this time].”
For Lenz, five magnetic-stripe card terminals in his Chicagoland store will need replacement. Depending on the cost, though, he might incrementally phase in the new terminals.
“If the cost is a lot, I don’t have to do five,” he says. “We’ll do the two for the point-of-sale stations and add [others] as the cost comes down or as our need increases.”
And while chip-based cards have been a standard in Europe for some time and Canada for the past few years, the embedded chip is new technology for not only U.S. consumers but also merchants.
For retailers, that means training staff. At Payne Pools & Spas, management does anticipate a learning curve, but isn’t daunted.
“We’ll do it like we’ve done everything else: When things like that need to be done, we’re able to face those challenges and get them completed when they need to be taken care of,” says Johnson.
Overall, professionals say, it’s just better to have the deadline at the end of the season, rather than the beginning.
“The timing is good for our industry relative to that Oct. 1 date, actually, because it does give us the winter to let things settle and do the bare minimum at the initial transition if it’s available and see how it goes,” Lenz says. “I’m guessing Oct. 1, stuff will be at its highest expense. By the time February, March rolls around, it’ll hopefully be a little bit less, and if I wanted to expand on that, I could add [terminals] for a lower cost.”
Pamela Kleibrink Thompson contributed to this article.
