Smart phones and chip cards signal more change

In the world of merchant processing, as with many aspects of daily life, the only constant seems to be “change.” And there are several important changes coming in merchant processing.

Some of these changes are available today, and some aren’t going to happen for a number of years – but it is prudent to understand what is coming so you can make decisions today that will save you money in the future. Let’s focus on just two.

First, Apple has just announced the new iPhone, and more people are carrying various smart phones. One of the things that a smart phone can do is operate like a credit card terminal. If you think you might want to use a smart phone as a terminal, as more retailers are doing, there are some issues you need to discuss with your merchant processing vendor.

One of the primary issues to address is, whose smart phone are you going to use? Your personal phone? A business phone? And what are your various employees, who aren’t owners, going to use? Your phone? Business phones? Their own phones?

When you use a smart phone as a credit card terminal, you are, in essence, sending that credit card terminal home at night with yourself or an employee. Obviously, if this is your phone, you as the business owner still maintain control over the device. But what if you have five delivery people who have their own smart phones? Would you send your countertop merchant-processing terminal home with them at night? Or think of that last question another way: would you send your cash drawer home with an employee at night?

So you need to look at your business and your own comfort level in deciding if you want to go that route. If you make the business case for using multiple smart phones with various employees, there are smart phone providers that can, at a very reasonable, fixed monthly cost, provide you with a turnkey solution that includes the phone, a data plan, a mag stripe reader, and a payment gateway. Your merchant-processing provider should be able to facilitate setting these up for you.

Another big change on the horizon is the introduction of “chip” cards. The U.S. is one of last places in the world where merchant processing systems don’t process transactions with a chip on the card instead of the mag stripe. Chip cards are harder to counterfeit or from which to steal data. Visa recently announced that it will be implementing changes to the card issuing process, and banks that issue cards will be encouraged to issue cards that have EMV chips on them.

There has been a lot of misinformation in the marketplace about existing terminals and if they will be able to process a card after January 1. Cards issued after January 1, 2013, will, in most cases, have both an EMV chip and a mag stripe. Your current terminal will continue to process these cards.

In 2015, if you have upgraded your terminal (or added the appropriate peripheral device) and can process a chip transaction, you will be able to shift some of the chargeback liability back to the card issuer. So, between now and then, if you have a terminal failure or need to upgrade for other reasons, you may want to consider requesting a terminal that will be able to support chip transactions.

If you have any questions about these changes or any other questions about merchant processing, our experienced customer service team is available to answer them.

John Mayleben CCP is Retailers Processing Network senior vice president, technology and product development, and a national expert on electronic payment processing. He is the first person in Michigan and among the first in the nation to receive the Certified Payments Professional designation from the Electronic Transactions Association.

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