Credit: Negative Space, StockSnap
Credit: Negative Space, StockSnap

Starting today, retailers must comply with a big shift in processing payments or face potential financial penalty. Yet for millions of individuals and small business owners alike, that shift could prove quite problematic.

In the hopes of making card-based store transactions more secure and reducing fraud, banks and card companies are moving away from traditional cards with readable magnetic stripes to chip-and-PIN or chip-and-signature cards, which are known also as EMV (or Europay, MasterCard and Visa) cards.

But though the Oct. 1 deadline for this shift has arrived, a report from tech news site Computer World reveals that more than half of credit and debit card holders have not even received there new cards yet.

And for small business owners, immediate compliance is also difficult. That’s because the shift requires that all stores be outfitted with new readers designed to interact with the new cards’ microchips. Customers will now “dip” cards into these updated readers, as opposed to swiping them.

This liability shift is designed to prod retailers to upgrade their technology and accept only chip cards, which generate one-time codes that are unusable by thieves, unlike static magnetic-stripe information that can be and is stolen on a regular basis. (For more details on the technology change, see this Q & A from CreditCards.com.)

But demand has been so high for the new readers that many business owners may have to wait as long as several months to get one installed. According to CNBC, only 5 to 10 percent of all retailers are ready with chip readers currently.

It gets worse. Businesses without new readers as of Oct. 1 will be held financially liable for any card fraud that occurs through transactions in their stores. It’s a big problem, not to mention a big change in the rule book, as payment processors or banks were the ones previously on the hook for fraud costs related to in-store “card present” transactions.

The new system will be a good thing in the long run. In Europe, where chip-enabled cards have become the status quo, incidents of fraud have reportedly dropped off. But while banks will be on the hook for the millions of individuals who have not yet received their new cards, what will the shift mean for millions of business owners who have yet to upgrade their payment technology due to lack of availability?

We suppose time will tell.

Entrepreneurs — are you ready for the shift to EMV cards? And, do you feel this is a good system for America to adopt? Sound off in the comments!

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