The EMV Deadline: Will Small Businesses Take the Hit?

April 22, 2015         By: Steven Anderson

It’s a fairly universal condition these days; small businesses, particularly small retailers, are struggling to survive in the face of an economy that still isn’t in the greatest of shape in a lot of ways.

Online retailers are cutting into the market, increasing prices on most everything are killing profits, and regulatory issues just make matters worse. But a new move designed to improve security for card users may prove to be too much for the small retailer to keep up with.

The change from magnetic stripe to Europay, MasterCard, and Visa (EMV) cards is one that’s been in the making for some time now, but while major retailers appear prepared, small business is still having some trouble. Reports suggest that some businesses may just not be ready for the switchover, and that could be a serious problem.

The story so far is that, right now, a host of United States customers have EMV cards in hand, and those that don’t already, will have them fairly soon. But only a handful of retailers, and those generally the largest retailers like Walmart and Target, have the necessary infrastructure in place to accept those cards as payment.

Smaller retailers, meanwhile, are largely conceding at least a temporary defeat, and noting that the infrastructure to take EMV just won’t be in by the October deadline.

That’s a risky practice for said retailers, as after October, there’s a new shift in liability, too; retailers who take credit cards but don’t use EMV will assume liability for any credit card theft that takes place on a system that isn’t EMV capable.

This is a fairly disastrous situation, especially given the timing; retailers have banded together to ask for an extension on the October deadline. Credit card issuers, meanwhile, are reportedly offering a cold reception to such concepts. But another, perhaps larger problem is in the works: small banks.

Small banks are likewise floundering, running behind in terms of issuing EMV cards in the first place. Cost—the EMV card takes about $1 to produce, five times what a magnetic strip card costs—and complexity are both said to be factors. For a small bank, meanwhile, such cost is difficult to absorb, particularly all at once.

Of particular note in all this is the timing.

With the deadline afoot in October, that’s approaching the holiday shopping season — a time that leaves small retailers with a particularly distasteful choice.

Either small retailers can pull all their support for credit cards during the busiest shopping season of the year, or take on a terrible risk of having to cover any credit card fraud that might happen in the meantime.

While the risk may not be that substantial—assigning liability here might be especially difficult if large numbers of retailers don’t have EMV equipment in place—it’s the kind of thing that could be a disaster for small businesses with slim profit margins.

Only time will tell just how this all ends up, but one thing is quite clear; this is a problem that will need to be resolved one way or another within just a few months.