Credit card swiping could be nearing end

Credit card companies only picking up fraudulent tabs for consumers who 'dip' instead of swipe come October

(John R. Coughlin/CNN)

MIAMI BEACH, Fla. – Say goodbye to the swipe!

Coming October, you will be "dipping" rather than "swiping" at most checkout counters. The big changes coming to credit card security are meant to keep you safe from fraud and identity theft.

The impact to small businesses will be significant given the upcoming so-called fraud "liability shift."

Entrepreneurs gathered for an event in Miami Beach to hear from SBA administrator Maria Contreras-Sweet as well as Twitter co-founder and CEO of Square, Jack Dorsey about new payment technologies, transaction security, and changes in fraud liability rules active Oct. 1, 2015.

"Effective October 1, if you do not have the EMV chip reader to read the EMV chip card that you're going to be getting soon, then the liability will fall on you [the small business owner]," said Contreras-Sweet.

EMV's, also called chip cards or smart cards are similar to contact-less payment methods like Apple Pay, in that when you dip the card, or tap your phone, it encrypts a unique transaction code in place of your card number.

According to Chase Bank's website: "EMV chip technology is becoming the global standard for credit card and debit card payments. Named after its original developers (Europay, MasterCard® and Visa®), this technology features payment instruments (cards, mobile phones, etc.) with embedded microprocessor chips that store and protect cardholder data."

"As technology gets more sophisticated, more safety and security is added," said Jack Dorsey, Twitter co-founder and Square CEO. "And one of the things about the chip card is that it actually acts like a little computer and constantly changes itself to remain secure, unlike the magnetic strip card which just has a static piece of information that anyone can take off and kinda use again and again and again. A chip card is constantly changing so it's always sure, and you just need to make sure you can read it."

"The phone adds another dimension in that it adds your fingerprint, so we can really prove and understand that that buyer is exactly who they say they are," continued Dorsey. "And we can do that if we can add more secure technology like the chip or the biometric of touch ID on an Apple device, the fraud potential goes down to close to zero."

As of right now the policy for business owners is, if fraudulent activity occurs, the card company assumes the risk. All of which will change this October for merchants who don't have a chip card reader.

Owner of Panther Coffee in Wynwood, Leticia Pollock, has seen the need for these card chips firsthand.  

"The technology is very outdated with the magnetic strips, and when you use the chips there is a less chance of fraud," said Pollock. "It's something that some of the customers were already requesting."

"We have a lot of international customers and they really don't want to swipe their cards anymore," said Pollock. "They want to use their phones, or they at least want to dip their cards. They really don't want any risk, and we don't want any risk."

"The reason this chip technology is so important is that we find that typically people think about hacking and cyber security and they think that's a corporate problem," said Contreras-Sweet. "But what's happening now, is that hackers know it's the small businesses that aren't putting up their defenses and so they're more vulnerable. We have found that over 68 percent of small businesses have had fraud committed on them. And so this is an important issue for small businesses to be alert, to be aware, and to be prepared."

Dorsey co-hosted the event with the SBA.

"Fraud loss in the industry in merchant inquiring is real," explained Dorsey, "It's about $7 billion in 2013 in the United States, which is more than the rest of the world combined. And so as you add more technologies to make us more secure and reduce fraud, there's a real benefit to the entire economy."

Dorsey has been working to get on this front edge of the liability shift with the introduction of cost effective chip card readers for small businesses.

"It's accessible, this is something that's easy to do, something you can take today and it not only provides you safety and security, but it also gives your buyers more peace of mind," Dorsey said.

Dorsey will be giving away a quarter of a million Squares for free in hopes to get sellers caught up with the technology as soon as possible.

Click here to apply to get a Square reader for free.

"Recently we introduced a new reader, which actually wirelessly pairs with your phone or with your tablet, just as your Bluetooth headset would or your Bluetooth speaker would," said Dorsey. "This actually allows you to read chip cards, or to actually accept NFC Apple Pay transactions from your buyer's phones or from their watch."

Square is not the only available option for card readers; OTI Global and nationalbankcard.com also offer them.

Europe has been utilizing the chip technology and contactless EMV for years.

"You can use it on you bank cards and getting on the tube," explained Liam Moon who was in Miami Beach visiting from London. "To pay for things it's very easy, easy for places like Starbucks, so it's very convenient for us."

Mayor Phillip Levine also came to show support for the small businesses of his city, explaining how he was "honored" to be able to host the event in Miami Beach. He believes this technology is "sending a message around the world."

"We are so delighted to see that today we are experiencing 63 months of consecutive job growth," said Contreras-Sweet. "But it's the small businesses that are creating that job growth, and so I love the large corporations, but it's the small that's driving our economy."

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