Remember when accepting credit cards meant having a manual ‘roller’ to imprint your customers’ Access and Barclaycard paper vouchers? Well, this year brings the most radical change to retailers’ payment acceptance methods since the introduction of EFTs (Electronic Funds Transfers) in the late 1980s. By the end of this year all of your plastic payment transactions will be made under a system being marketed as chip and pin. The changes will apply across the board, to all credit cards, debit cards and fuel cards, and are supposed to be fully implemented by January 1, 2005.
The main reason for the change is that plastic card fraud has become an epidemic, and although many retailers have always felt that the card issuers tended to pass the cost of that fraud back to the retailer at the slightest excuse, ultimately the card issuers themselves have realised that there is a limit to how far any retailer can go when trying to check the status of a scruffy piece of plastic with an often illegible scrawl of a signature. So now the cards are being fitted with a silicon chip, which holds far more data about the account than the old magnetic stripe (and should also be capable of more protection against being read by the wrong people). All cardholders are being issued with a pin (personal identification number) with which they will confirm every transaction, instead of signing a receipt. Not exactly earth shaking is it? But these changes are giving some retailers the ‘needle’.
There are several factors causing unease: retailers naturally dislike the shift in liability (for fraudulent transactions) from the card processing companies onto themselves after December 31, 2004. After all, is any card technology infallible? Secondly there is a major concern about the costs of implementing the changes: much of the existing pos equipment across the country is not compliant with the new payment systems. Retailers operating company-owned sites can expect their oil company to install any new equipment and software in due course. However, the independent dealers will need to make the investment themselves, and that is giving many of them headaches. There are dealers who have installed new pos systems at considerable outlay over the past few years, having been under the impression that these would be chip and pin compatible – only to find out now that ensuring compliance with all the payment cards they accept means paying for further expensive hardware and software upgrades.
Many dealers will, however reluctantly, opt to scrap equipment that may be only a few years old and replace it with a new, fully compliant integrated pos system. Great – join the queue. There are not that many forecourt-dedicated pos suppliers left out there, and most people choose their pos not just for its ability to deal with credit cards, but for important functions such as stock management systems and integration with sensible, easy-to-use accounting applications. While some oil companies have recommended pos and back office systems to their dealers, some have yet to do so, or are merely quoting a compliance specification without naming any particular supplier. Quite apart from the cost of a major capital investment in equipment, the pos suppliers are likely to be very busy indeed for the next few months servicing the demand, so the pressure to order sooner rather than later is definitely on.
One alternative to scrapping existing systems is stand-alone card readers. While these may provide a stop-gap solution, the costs may not be as cheap as you’d expect. In addition to buying the equipment, there are likely to be ongoing ‘software support’ charges and possibly the need to upgrade existing pos equipment to link it to the card reader. From a security perspective, many of us still remember the sort of accounting fraud that used to happen in the early days of EFT, and would be uneasy about their return.
Clearly there is a need for dealers to make a decision soon: the changes are happening and can’t be ignored without losing one or other of your payment cards, or accepting a huge potential liability for any fraud that occurs after the end of the year. A major investment calls for careful consideration. Check what your fuel supplier recommends and speak to your accountant and business adviser before making the choice.