Will Chip-and-Signature Be Enough to Stop Fraud?

May 29, 2015

This October, the United States will undergo a huge shift in how it processes credit and debit cards. U.S. banks seeking increased security are distributing chip-and-signature credit cards, as retailers are spending billions of dollars on upgrades to their machines to prepare for the new cards. The new cards are supposed to be more secure than the traditional strip based cards because they are placed into the bottom of the cash register, and cannot be processed unless the consumer signs for the purchase. But many still critique the U.S. for not really protecting consumers, as banks elected to skip the chip-and-PIN technology that has been proven to be the most secure technology.

The Wall Street Journal (WSJ) reports that even though a half-billion new chip embedded credit cards will be released this year, the United States is still not protecting consumers from fraud if cards are lost or stolen. WSJ notes that Canada, Australia, and Europe have chosen to adopt the chip-and-PIN technology because it is more secure and nearly impossible to hack, unlike the chip-and-signature technology that most major U.S. banks have chosen. The banks state that they chose this method over chip-and-PIN so as to not burden consumers with having to remember a four-digit code.

Bank of America, Discover, J.P. Mogan Chase, and Citigroup are all set to release chip-and-signature cards this year. As a result, merchants are rushing to upgrade their systems to accommodate the new cards. After the deadline, if a merchant doesn’t have the upgrades they will be responsible for the cost of any fraudulent activity that occurs as a result. A payment-industry group calculates that about fifty percent of American merchant terminals will be ready to accept the new cards by the deadline. This will make up about 80 percent of U.S. purchases.

Even though the new chip cards will make it harder to commit fraud, it is still possible. Merrill Halpern of the United Nations Federal Credit Union, believes the debate about chip-and-PIN versus chip-and-signature centers will wage on for the foreseeable future. He told WSJ that credit card issuers and banks should be working together to do the most they can do to fight fraud, not choosing the second best solution.

As the U.S. goes through this major conversion, high risk merchants must also prepare for the new chip cards. Do not go through the switch alone. Instead rely on credible and competent payment processors that understand the new cards and will create and monitor your high risk merchant account 24 hours a day.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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