ST. PETERSBURG, Fla.—Small merchants are expected to lag well behind major retailers and even regional stores in converting POS to EMV—which may impact the future of some mom-and-pop shops and loans made to them, asserts one expert.
Art Harper, director of solutions consulting at PSCU, said that with small merchants expected to trail all other retailers in the EMV shift, fraudsters may likely step up their focus on these targets.
In fact, half of 675 small businesses surveyed by The National Small Business Association in 2014 reported they were victims of cyber-attacks last year, up from 44% in 2013. Sixty-eight percent of those who said their data was compromised said they had been hacked at least twice.
Harper said small businesses need to be aware that post October 2015, the weakest link in the transaction chain accepts the fraud costs. So if a customer can’t use the EMV capability on their card at a small merchant’s store, and fraud occurs, the merchant accepts the fraud costs.
One Event Can Sink The Ship
Harper emphasized that’s a big risk for a small business.
Art Harper, PSCU
“The mom-and-pop business needs to know that one fraud event could be the torpedo that sinks their ship,” said Harper. “For a small business barley making it, one fraud event and they may close their doors.”
And, Harper agreed, it would spell the end for any loan the small business has taken from a bank or credit union.
Harper emphasized that a large number of small businesses still need to be educated about EMV, and what the potential costs are for falling well behind other retailers in converting. He acknowledged, too, that small businesses may not be as concerned about cybercrime since they have yet to feel its bite like the larger retailers, lulling some into a false sense of security.
Harper said reports indicate that 70% to 80% of big box merchants are expected to be up and running on EMV by the liability shift deadline or the end of the year. “And 60% to 70% of tier-two merchants by that point, as well.”
Harper, who sits on the EMV Migration Forum, an independent cross-industry body created by the Smart Card Alliance, said the Forum is reaching out to small merchants now to provide education. “Visa and MasterCard are doing the same thing,” he said.
Credit Ahead Of Debit
Like other CU card processors, PSCU reports that credit EMV conversions at CUs are well ahead of debit, due to the uncertainty around debit routing that was created by Judge Richard Leon in 2013 when he struck down the Fed’s debit interchange rules. Judge Leon’s decision was overturned by a federal appeals court in 2014.
Harper said PSCU expects 95% of its CU credit card clients will be ready for members to conduct EMV credit transactions by the end of the year, with many ready by the liability shift deadline.
A number of PSCU debit clients have been going live now with EMV, according to Harper. He added that more than two-thirds of PSCU’s debit clients are in the certification queue for EMV debit. In May PSCU became the first CUSO certified to issue debit cards with EMV chip card technology on First Data’s Debit Solutions platform.