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82 August 2015 | beautystorebusiness.com That means if a fraudster comes into your non-chip-card-ready store after Oct. 1 and charges goods and/or services on a credit card, your beauty store eats the loss. All of it. "I would imagine that our stores will have to upgrade their terminals to prepare for this," says Rudy Falco, COO of Belmar, New Jersey-based AVEYOU Beauty Boutique (aveyou.com)— which also has an online store. "We would definitely like to minimize this liability for our brick-and-mortar stores." Art Aghalar, owner of Los Angeles-based Elegante Beauty, is less concerned. He's fully aware that Elegante Beauty will be on the hook for fraud if he refuses to bring in new chip card terminals. But Aghalar has decided to take the risk and is planning on sticking with his old machines. The problem is, hundreds of thousands of domestic businesses— including many beauty stores—have no idea they even have a choice and all of them are on a collision course with fraud liability this fall. Not surprisingly, the credit card companies are starting to get worried. GET READY "While the credit card industry needs to churn out a lot more chip cards, retail- ers seem to be in worse shape," says Matt Schulz, a senior industry analyst at CreditCards.com. "Very few are ready to accept chip cards." Indeed. According to a February 2015 poll by Newtek Business Services (thesba.com), 71% of business owners are unaware that they'll be on the hook for magnetic stripe fraud after October 2015. "Business owners still do not have a full understanding of the importance of chip card processing," says Barry Sloane, CEO of Newtek. "It is extremely important for individuals taking credit card payments to be aware." Still other businesses—that already know about chip cards—are slowing the U.S. migration to the new technology by hesitating to make the switch or simply refusing to do so. One example: An October 2014 sur- vey by American Express found that more than one-third of merchants sur- veyed who knew about chip cards were on the fence about the technology—or had decided not to upgrade to chip card terminals. Fifty-seven percent of those merchants cited the cost of chip card terminals as the reason they were on the fence or were simply going to ignore the new technology. Despite the backlash anticipated from businesses that begin getting stung for fraud this fall, the major credit card companies are hanging tough with their deadline. And it's no wonder. All of those credit goliaths have been burned by the wholesale theft of credit card data that is often measured in millions of accounts and all of those titans have been deal- ing with untold numbers of angry card holders—many of whom know all too well that security on mag-stripe credit cards is a joke. Chip cards, by compari- son, are much more secure, according to Megan Shamas, a spokesperson for EMV-Connection, a branch of the Smart Card Alliance. CHIP CARD SUCCESS Chip cards produce a one-time-use cryp- togram for every transaction, making it much more difficult for fraudsters to compromise. "The creation of dynamic cryptograms for every transaction with online authentication is an important feature of chip cards that provides enhanced levels of security," says Randy Vanderhoof, director of the EMV Migra- tion Forum. Plus, "if a chip card is lost or stolen, the card is also much more difficult to counterfeit," says Shamas. Chip cards—also known as EMV cards, an acronym for the three companies who helped develop the card technol- ogy (Europay, MasterCard and Visa)— also have an extremely successful track record in Europe. Credit card fraud in the United Kingdom plummeted by 72% after chip cards were widely adopted, according to Patricia Moloney Figliola, a specialist in Inter- net and telecommunications policy with The Congressional Research Service—a research team employed by the U.S. Congress. Canada saw a 48% reduction in fraud after chip cards were rolled out there, Figliola says. These days 99.9% of all credit card terminals in Europe are chip-enabled. And 84.7% of terminals in Canada, Latin America and the Caribbean also accept chip cards, says EMV-Connection's Shamas. In fact, the United States is the last major market to make the switch to chips, Figliola says. "This is a technology that has already been widely adopted in many markets, and has proven to significantly reduce the incidence of fraud at the physical point- of-sale," says Kim Lawrence, senior vice president of corporate initiatives at Visa. Besides intense pressure from credit card companies on chip card migration, fed-up consumers are also pounding the drum skins. A recent MasterCard study revealed that 63% of credit card holders want a chip card "immediately," says Carolyn Balfany, group head of U.S. product delivery for Mastercard. And 87% of those surveyed said "they were completely comfortable with the idea of transitioning to chip cards," notes Balfany. MasterCard has been pushing its "chip-and-PIN" cards in markets outside the United States for some time. "The number of issued chip cards [in the United States] is expected to reach 600 million by the end of 2015," says Randy Vanderhoof, director, EMV Migration Forum. You'll be on the hook for credit card fraud if you don't have chip card terminals by Oct. 1, 2015. Top and bottom image courtesy of Joe Dysart, middle image courtesy of Randy Vanderhoof