Survey: Small businesses not ready for new credit card technology

The majority of small businesses in New Jersey aren't prepared to handle credit or debit cards that are equipped with new fraud-fighting computer chips, according to a new survey.

The new credit cards, which many consumers are receiving now, are designed to protect cardholders against fraudulent transactions by encoding cardholder information within an encrypted microchip and date that changes with each transaction.

To accommodate the new technology, businesses that accept point-of-sale card payments need to add EMV (Europay, MasterCard and Visa) chip card technology to their existing terminals or purchase new card readers. Businesses that don't have terminals that can read the new cards will be liable for fraudulent point-of-sales transactions starting on Oct. 1.

According to a Wells Fargo/Gallup Small Business Index released on Aug. 13, many merchants had no idea about the liability shift deadline.

"Only about half (49 percent) of the business owners that accept point-of-sale payments were aware of the shift in liability," said Marcus Cobbe, Wells Fargo's Northeast small business strategist. "Twenty-nine percent reported they planned to upgrade their credit card terminals to accept EMV chip cards before the deadline and 21 percent said they would never plan to upgrade."

The top reasons business owners said they do not plan to swap their terminals before Oct. 1 include:

• 48 percent feel that upgrading their payment terminal will not impact their business;
• 46 percent do not want to pay for the costs associated with upgrading;
• 41 percent are not concerned about the liability shift in the case of fraud.

"Merchants expose themselves to the shift in liability when there is fraud and disputes if they don't have upgraded terminals," Cobbe said.

The survey also revealed business owners are evenly split about whether the liability shift will reduce fraud for businesses. Forty-two percent feel it will improve protection from fraud, while 42 percent think it won't.

Regardless of how they felt about upgrading their payment terminals to accept EMV chip cards, the overwhelming majority of business owners still think cash is king.

Payment preferences include:

• Cash or check: 94 percent of small business owners say they accept check or cash as a method of payment;
• Card payments: 41 percent accept debit card payments and 35 percent accept point-of-sale credit card payments;
• Mobile: Just 15 percent take payments in-person via a mobile-enabled credit card reader;
• Online: 25 percent accept payments online via credit card and 19 percent say that their business accepts online payments through a payment provider such as PayPal or Google Checkout.

The survey results are based on telephone interviews with 600 small business owners, with annual revenues up to $20 million, in all 50 United States conducted July 6-10, 2015. The margin of error is +/- four percentage points.