Local merchants are slow to adopt chip card technology

Local merchants are slow to adopt chip card technology

HORRY COUNTY, SC (WMBF) - By now customers are using, or at least have heard of, debit or credit cards with the microchip.

It's supposed to help in protecting an individual's money. However, not every store makes using the chips a choice, and if you do use them, you may not be using them the safest way possible. In a WMBF News special report, we take a look at the issue and how you can get the best protection.

Computer chips are the latest technology in credit card security measures that consumers and merchants said they are all still getting used to.

"We are in the process of getting it," says Marty Cannon, the owner of a beer and wine store in Carolina Forest.

"The banks are telling us it's time," said Joel Dakin, a manager at Kroger.

"There was a backup, and I said, 'Well, when are we going to get it?' And they said then they sent it," said Jean Orejuela, a local business owner.

Technically called EMV, for Europay, computer chips change the way credit cards are processed.

Instead of sliding a card for process, the consumer now inserts it. The change isn't due to some new governmental regulation or law, but rather the result of a shift in liability.

MasterCard and Visa decided together that after Oct. 1, 2015, whichever entity, bank or store had the lesser technology would be financially responsible in the event of a hack or card fraud, because the chips are more difficult to use fraudulently.

It's why customers see more stores like the Kroger in Carolina Forest, which just uploaded the new chip readers two weeks ago, finally getting on board.

"We've had this installed for years but we haven't actually used the technology chip reader. But now that more people are getting the cards, we kind of need to keep up," said Dakin.

Kroger employees are getting the word out about the technology by prominently displaying information at its check outs.

It makes sense for big stores to get on board. According to investor relations, Kroger made $108 billion in sales worldwide in the 2014 fiscal year.

But many smaller businesses say it's an investment they're still working out by weighing the cost of upgrading against the cost of liability.

"Not every merchant or not every card issuer is going to take full advantage of it because taking full advantage of it also causes additional restrictions, like, for example, if the network is down and you can't communicate with the card issuer and that policy is being enforced, then you can't have any transactions going on at the merchants store," said Dr. William Jones, a professor at Coastal Carolina University who teaches computer architecture and digital logic design. This meaning, merchants wouldn't be making sales if the system was down.

It's really a merchant's choice, though the goal is for EMV to be the only way to purchase with a card. In Europe, the technology has been in use since the early 90s.

In the meantime, it's in a customer's best interest to have their financial institution replace their old magnetic swipe cards with a chip card if it hasn't happened already.

There are several reasons why. For one, the strips are very easy to copy. Skimmers can copy the information off a card before going to a merchant, sliding the card through the machine and then getting the money for free, said Jones. The reason thieves can copy cards easily is because the information on card strips is static and stays the same.

A recent report found 37 percent of all credit card fraud in the U.S. is the result of someone copying the information from one strip to another. When the computer chip is processed, it makes an encryption of data unique to every single transaction.

As America works to catch up on the technology, several businesses give consumers both options.

"If someone comes in without a chip, you can still swipe it," said Orejuela, the owner of ABC Coastal in Carolina Forest.

Orejuela said she gets questions about the new system all the time.

"I had one gentlemen come in and he was very emphatic. He thought it was a waste of time and it took too much time to process, which it really doesn't take that much time," she said.

Many feel the six or seven extra seconds is worth it to prevent the hardship of a person's card strip information being copied and used, but that doesn't mean the chips are fail-safe.

It doesn't prevent phone fraud transactions as the result of someone having a person's card numbers, and it doesn't prevent someone from stealing a card and using it in person.

For the best protection, consumers should have their settings to where the card can only be used with the combination of a pin number.

By 2017, gas stations will have to comply with the chip readers or face liability.

In any case, the move to chips is the wave of the future. The technology is trying to get ahead of the credit card fraud industry, which, according to CreditCard.com, predicts that hackers will steal $19 billion from consumers in the year 2018 alone.

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