Gail Cavanaugh is a business consultant and life-insurance agent based in Portsmouth. A specialist in retailer and merchant services, Cavanaugh talked with Providence Business News about the security – or lack thereof – with the new EMV chips (Europay, MasterCard and Visa) found on credit cards and how retailers should be dealing with the costs associated with buying new EMV equipment.
PBN: Can you tell our readers about some of the dangers consumers and retailers are reporting with the new credit card chip – or EMV – technology?
CAVANAUGH: Although the new chip card technology has resulted in a significant reduction in losses overseas, vulnerabilities to the consumer are incipient. There is no protection against online fraud with the new EMV chip technology. Thieves can still use the new credit card with just the credit card number, CVV code and expiration date. A PIN number is not required for a customer to use the card, which does not make the card safer to use. Even though the new cards are embedded with the new chip technology, they still contain the magnetic stripe with the card holder’s information, to which card thieves can still gain access. The magnetic strip was included so that retailers, who have not converted their terminals to the new technology could still swipe the cards with the old terminal. This is still leaving the cardholders at risk, since thieves can still obtain the cardholders’ information. Additionally, the point-of-sales systems accepting credit cards with the chip technology could be hacked, causing the credit cardholders’ information to be exposed. Additionally, any merchant not converting to the EMV chip technology enables thieves to gain access to cardholder information while the cardholder is transacting business with this merchant. Therefore, the banks will hold the merchant liable for the losses. The banks have announced that they will no longer cover the losses for any merchant who does not convert to chip technology. The losses involved could be staggering in the event that consumers suffer losses.
PBN: What is skimming and how does it work at an ATM or brick-and-mortar?
CAVANAUGH: Skimming occurs when thieves run credit cards through a device called a skimmer, which captures all the information on the magnetic stripe of the credit card. This most commonly occurs at ATMs, gas stations and restaurants. Thieves then use the information to fraudulently make more purchases online and/or transfer the information to counterfeit credit cards.
PBN: Is there a way to look out for – or protect against – credit card skimming?
CAVANAUGH: Since the device is difficult to detect at ATMs and gas stations, the best way to protect oneself is to limit one’s use of ATMs, to use cash instead of a credit card at gas stations and restaurants, and to check bank statements often for inconsistencies. Thieves are able to withdraw cash from checking accounts that are linked to the debit cards. If anyone offers to “clean” your credit card, they may be running it through a skimmer. Business owners will have to monitor the activities of their employees to ensure they are not using skimming devices on the premises.
PBN: Why haven’t more retailers switched over to new credit card processing equipment?
CAVANAUGH: Because of the costs involved, smaller merchants are not converting to the chip technology and feel they have very little exposure to fraud compared to a major retailer. However, when thieves discover this, the smaller merchant may become a target for fraud and identity theft.
PBN: How should small business owners manage the costs associated with this new equipment?
CAVANAUGH: Converting to the EMV chip technology will increase costs for the business in the purchasing of new equipment, in hiring and training staff, and in educating and training the customers in using the new terminals. Therefore, the business owner will need to keep a record of all expenses involved to determine where they can cut costs in the future. Business owners will also have to increase their sales volumes to cover the additional expenses and increase their profits. The way to increase sales volume may involve selling more of the higher priced units or teaching sales clerks to sell more volume. Keeping accurate records will be essential.
