New Payment Standard for Credit and Debit Cards
Over the course of the last year or two, many banks and credit card institution introduced new EMV-compliant “chip” cards to replace the old-fashioned magnetic stripe cards. Credit and debit cards using EMV technology have been the standard in Canada, Europe, and Asia for several years, and will soon be common to the United States.
EMV is named after its developers: EuroPay, MasterCard, and Visa. EMV credit and debit cards contain a small embedded microprocessor chip which holds specific cardholder information, making counterfeiting and fraud much more difficult than with traditional magnetic stripe cards.
The “chip” cards also prevent fraud since cardholders never have to hand them over to anyone. They no longer have to worry if a waiter or clerk is secretly writing down the credit card information to make a few purchases after getting off work. Instead of handing the card over or swiping it, cardholders simply ‘dip’ the card into the bottom of the payment terminal. The card then stays in the machine until the transaction is complete.
Unexpected Risk Exposure for Dealers
Retailers, including dealerships, need to be able to accept these new EMV cards by this fall. Visa, MasterCard, Discover, and American Express have set October 1, 2015, as the deadline. If dealers cannot accept the new cards by then, dealers may bear the brunt of charges deemed fraudulent.
Today, if someone pays for a $500 RO with a counterfeit credit card, most banks will absorb the cost of the purchase. They won’t charge the customer, and the dealer will still receive payment. After October 1, 2015, that liability could shift to dealers if a customer attempts to use an EMV enabled card and dealers do not have the means to accept it. In this example, dealers are out $500 or possibly more if the transaction is fraudulent.
There are a few important things to note:
- The October 1, 2015 liability shift only affects purchases made with credit or debit cards in store, not over the phone or online.
- Traditional magnetic stripe cards will still work after October 1, 2015, as not all banks that issue credit and debit cards will have replaced their existing cards in circulation prior to the deadline.
- Aside from being able to process the new “chip” cards, dealers need to take other precautions to be safe. Before accepting payment, dealers need to verify the person’s photo ID, address information, and signature.
EMV Compliant Solutions for Dealers
Dealers should prepare soon to accept EMV transactions (10/01/2015) at the dealership by choosing a service provider that offers EMV compliant software and hardware. At the Gillrie Institute, we looked at some of the solutions that are available in today’s market, and have listed the vendors that we see most frequently below. (Please note that we do not have any (financial) relationship with these providers. Our advice is solely based on dealer feedback and real-life occurrence. No assumptions of suitability or quality are intended or should be construed.)
ReyPAY by Reynolds & Reynolds (R&R) and Global Payments (OpenEdge):
Reynolds and Reynolds, in partnership with global payments, is one such provider. Its combined solution, ReyPAY, is EMV compliant, and also accepts traditional magnetic stripe and Near Field Communication (NFC, e.g. Apple Pay). In addition, ReyPAY integrates directly with the dealers R&R DMS, which eliminates costly transposition errors and allows dealers to send parts and service invoices to customers via email to pay online. ReyPAY also simplifies the reconciliation processes since transactions from multiple payment terminals are combined into a single online portal.
For more information on ReyPAY, visit reyrey.com/reypay or call 800-767-7879.
ePayments by CDK (former ADP Dealer Services) and CenPOS Cash Management Solution:
CDK built the ePayments solution on CenPOS’ cloud-based payment engine allowing dealerships using the CDK Drive DMS to accept online, mobile and alternative payment options such as Apple Pay, Google Wallet, and PayPal. The solution is also integrated with CDK’s Service Edge mobile application that customers can use not just to choose on how they want to pay, but also arrange their vehicle pickup time within one application. With CDK ePayments, dealers can accept and reconcile payments across multiple channels, engage customers who want self-service or remote payments, and greet customers at their vehicle with a tablet in hand.
For more information on CDK ePayments, visit cdkglobal.com/solutions/cdk-epayments or call 888-672-2140.
Credit Card Processing by Dealertrack and Element Payment Systems (Vantiv):
Dealertrack partnered with Element Payment Services (division of Vantiv Company) for credit card processing. The Element integration handles EMV and NFC, and supports the new chip-based requirements. This is a different approach than R&R and CDK apply as there is no client-side software provided through Dealertrack. Also, dealers don’t have to configure Dealertrack devices and hardware. As long as dealers have a USB port and Windows Surface device they are able to run the Element system that is integrated with the Dealertrack DMS.
For more information on Dealertrack’s Credit Card Processing services, visit elementps.com/dealertrackmerchantreferral or call 866-435-3636 ext. 1721.
We expect other DMS vendors to team up with payment specialists soon, and provide EMV-ready solutions or DMS interfaces. We also recommend dealers reaching out to their banks, credit card institutions, and merchants to get advice on EMV and recommended payment solutions and guidelines. Dealers should update their IT and Data Security Policies.
