Businesses prepare for shift in credit card technology

If you're using a credit or debit card in a shop or at a gas pump, it might take a few extra seconds to pay starting Thursday, and the transaction will be different:  instead of swiping the card's magnetic stripe, you'll insert your card into the card reader to process a small metallic chip inside. 

That chip is becoming the new standard in credit card transactions and starting October 1. It's designed to combat fraud more effectively.

Businesses that don't use the new card readers can be liable for the money lost if a fraudulent transaction takes place in their store. Until now, that liability has fallen on the bank. 

Mary Ann Miller, a fraud executive adviser at NICE Actimize calls the new technology a "secure handshake" between a bank's authorization system and a merchant's check-out register. "The magnetic stripe could be duplicated by criminals - someone working at the merchant - or someone else, unbeknownst to the merchant," Miller told KPCC.  "The chip makes this difficult, if not nearly impossible."  

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A browse through some stores on La Brea Avenue in Los Angeles revealed that small business owners are generally prepared for the switch. Most had the new card readers installed at the check-out counter. A couple didn't. One business owner didn't know about the coming change.  

Alex Schneider, owner of Limelight Liquors in Hollywood received his new card reader a few months ago when he switched to a new credit card services provider.  He was aware of the coming shift in potential liability for fraud and confident that the new chip-based system would make credit card transactions safer.  But he hadn't tested out the new card reader and didn't plan to until he's required to on October 1. 

"Already, a few people ask me, especially tourists, 'why are you not inserting the card [into the chip reader]?'" said Schneider."But I said our machines are not ready yet. Only in October.  So, we'll see, right?"

Mary Ann Miller, the fraud adviser, said the data breach at Target was a wake-up call to most businesses, so they moved to update their card readers. She worries less about whether businesses have the right card readers and more about whether their employees know how to use them. 

"Often, you will find the card reader that has been supplied for the merchant ready to go, but the person behind the counter doesn't know how to conduct that transaction," Miller says.

So, she said, as the stripe-swipe phases out, credit card users should be patient with staff learning the new system.  They should also understand that the chip transaction requires the card to stay in the card reader a few seconds longer.