Webinar - EMV 101 - What Small Businesses Need to Know

I would now like to turn the conference over to Meredith Olufsen. Meredith, please go ahead.

Thank you so much and thanks to AT&T for hosting us today. On behalf of administrator Maria Contreras. Sweet. The SBA is thrilled to be partnering with Square on this important education effort. I want to thank Leah and Owen and the entire team at Square who will shortly be giving you their presentation today on this critical topic. And I want to thank the folks on the line who joined us for today's presentation. We know that small businesses are the engine of the economy. They create two out of every three net new private sector jobs. Here at the SBA, we're responsible for advocating for America's 28 million small businesses to make sure that you all have the tools and resources you need to start and grow your business. We're best known for providing access to capital and helping connect small businesses with contracts. But we also promote free or low cost counseling and business advice. And as part of our counseling services, we work to educate small business business owners about important topics that impact their business, like the EMV migration. To learn more about SBA services and how we can help you, you can visit SBA.gov and for more information on today's topic, please visit SBA.gov EMV and with that, I'd like to turn it over to Leah and the Square team for today's presentation.

Great.

Thank you. Meredith, Good afternoon. Thank you for taking the time to join us today as we talk about new payment technology method for small businesses. My name is Leah Ciodosio Pisanelli. I'm on our government affairs team at Square and I'm joined by my colleague Owen, our business strategist. We're here today to discuss the switch from magnetic stripe cards to chip cards and what that means for you. We're also going to talk about alternative payment methods that you will likely see more and more from your customers. We're thrilled to be working so closely with the U.S. small Business Administration and Meredith and to provide small businesses with more information on EMV and the liability shift. At Square, we serve millions of businesses, large and small, and work with small business owners in particular to provide the tools you need to start, run and grow. One of our main goals is to level the playing field for small businesses by making sure that you have all the information you need to compete and put your best foot forward. Too often, changes in technology, such as those we are experiencing now with credit cards, are easily adopted by large companies with deep pockets, but are out of reach for America's Small businesses. That's why we're partnering with the SBA today to explain to you the transition in payment technology to make sure that you are prepared. Next slide, please. As small business owners, you need to be able to make your to meet your customers where they are. That means you need to be able to accept payments in a way that is most convenient, safe and secure for them. If you look in the average American's wallet, you will likely see some cash and a few magnetic stripe cards and maybe even a card or two with an embedded chip. In the coming months, those magnetic stripe cards will be replaced by chip cards. And in the coming years, those wallets will likely be replaced by smartphones. Magnetic stripe cards are pretty outdated. They're made from the same technology that you would find in a cassette tape here in the United States. We've learned that the hard way. From high fraud rates, the United States lost $5.3 billion to credit card fraud in 2013, up 14.5% from 2012. Half of the world's credit card fraud happens in the United States, even though only a quarter of all credit card transactions happen here. In order to ensure that our payments are more safe and secure and that our customers information is safeguarded, we are making a transition. We, as in the United States, are making a transition from magnetic stripe card technology to the much more secure chip card technology, or emv. That technology is already used in most developed countries throughout the world today. So today we're going to explain to you what exactly EMV is, what the transition will look like, and what we think payments will look like in the near future. And most importantly, what small businesses like you need to know in order to be prepared. First, we're going to show you a quick video giving an overview of what EMV or chip technology is, and then we will explain it in more detail. So if we could switch to the video, please.

Absolutely. Please just stand by for one moment. As a quick note to all the participants, this is a video that we'll be showing to you. This video for the audio for the video that's going to be shown will.

Be played through your computer speakers.

So please take this moment to turn your computer speakers on and turn the volume up.

Most of the things we use every day, like phones and cars, have improved by leaps and bounds since their invention. Yet that magnetic stripe on the back of your credit card is the same technology you'd find in the tape in your Walkman. So our credit and debit cards are about to get an upgrade. This new technology is called EMV after Europay, MasterCard and Visa who developed it. But it's sometimes referred to as chip cards or smart cards too. These new credit cards will look just like the ones we use now, except for the little chip embedded in the card itself. See, that little chip is actually a tiny computer card dog and it makes counterfeiting much more difficult. Unlike magnetic stripe cards, chip cards create a unique transaction code. Every time they're used. The card is dipped and left in place as the chip and reader agree on a secret one time only password which can't say, be copied by a bad guy. Now, while the US Is first in a lot of things like moon landings and rollerblading, we're one of the last countries still using magnetic stripe cards, and it's costing us. The US Is home to roughly a quarter of the world's credit card sales, but nearly half of the world's credit card fraud. And credit card fraud isn't a pie we want the biggest slice of. So Americans will soon be issued chip cards, and if you're a business owner, you'll need a way to accept them.

Hey Leah, I do have the video has concluded on our end. Has it concluded on your end as well?

Yep.

Okay, in that case, I'm going to go back to the slideshow for you.

And when you go back, do you mind suggesting that everybody send questions in online so that way we have them for the end?

Absolutely. Again, as a reminder, you are welcome to submit questions during the presentation and we will answer your questions during a planned question and answer session. You may use the Send Note button in your top toolbar or the Notes tab on the right hand side of your screen. Please address your notes to all moderators. And just as a quick reminder, some participants have said they haven't been able.

To see the video.

The video shows the video's bandwidth dependent, so if you're in a slower modem or a more rural area, you might have had difficulty seeing the video.

You can see the video online, you can find it on Square's website, but we can also send an easier link so that you can view it at a later time. Okay, so we're all set. Okay, so what is EMV or chip? As the video explained, EMV is a global standard for credit and debit card payments. The standard was named after its original developers, Europay, mastercard and Visa. This standard uses a chip that is embedded in payment cards to authenticate payments. This chip is like a mini computer. It protects customer data and is very hard to counterfeit. Next slide, please. So how is EMV or CHIP more secure? The reason why is that CHIP or EMV cards encrypt sensitive information, which makes it much harder to counterfeit than their magnetic stripe predecessors. While data on a magnetic stripe card is static, the data on a chip card is constantly changing, making it much harder for fraudsters to access or to copy it. For example, when a buyer puts a chip card into the card reader, the chip talks back and forth with the card reader in a secret language to authenticate the transaction. That language is different each time the card is entered into the reader. It's important to note that chip cards are only more secure when they are read through specific card readers that can speak this language to authenticate the card. If you were to key in a chip card's number, that card is no more secure than a magnetic stripe card. It's the chip when read in the EMV reader that makes everything more secure. Next slide, please. So who uses chip cards? In most developed economies, chip cards have been the norm for years. Most consumers there use chip cards and authenticate their cards with a unique PIN number, kind of like the PIN number you used at the atm. Here in the United States, we will not use pins, at least not yet. We will still verify our payments through signature, just like we do with the magstripe cards. Today, the United States is among the last major markets to adopt emv. This is largely due to the cost of replacing card cards and terminals. It is also due to consumer behavior. In the United States, we like to swipe cards. It's what we're used to. However, sticking with old technology has made us the target for fraudsters. As I mentioned already, the United States only accounts for one quarter of the world's transactions, but half of the world's fraud. Next slide, please. So when will we see chip cards in the United States? Some of you probably have already been receiving your chip cards in the mail or have seen customers with them. We're seeing their penetration grow quickly in our systems. Currently, 25% of cards swiped by square merchants are chip enabled. That's up from 3.4% in January and expected to grow to about 40% by the end of the year. Next slide, please. So let's talk a little bit about the liability shift. The liability shift that occurred this month in October. One of the most important things that small businesses need to be aware of is this shift that happened this month. Essentially, what it means is that you, as a small business owner are now liable for certain types of fraudulent transactions with a chip card. If you process that transaction on a terminal or reader that only reads magstripe cards and cannot read a chip card. If a customer presents a chip card and you only have a mag stripe terminal, you could bear the fraud loss that is a loss that was previously covered by the banks. So let's unpack this a little bit to explain all of the possible scenarios. If a customer uses a chip card and you have a chip card reader, the liability is still on the bank, although we should say the incidence for fraud here is very low given what we explained earlier. Now, if a customer uses a magstripe card and you process it on either a mag stripe terminal or a chip card terminal, the liability is also still on the bank because the bank didn't upgrade the card. So again, the only time when a small business will be liable for fraud or potentially liable for fraud is if a customer presents a chip card and you do not have the ability to read it. So you would then need to process it as a magnetic stripe card. Next slide please. So what does that mean for you? Bottom line, you need to be able to accept chip cards to ensure that your business is fully protected from all EMV related fraud liabilities. To do so, you will need to upgrade to an EMV compatible terminal or reader in order to accept chip cards. So something that we want to point out here is this is an opportunity. It's sort of. We like to think of it as an insurance policy of upgrading to the newest and greatest technology. So another aspect of it that you should understand is how it actually works. So instead of swiping a card, chip cards are inserted or dipped into the reader for the entire sale. Chip card transactions typically take a few seconds longer than magnetic stripe transactions as encrypted data is securely sent back and forth between the reader and the card. Next slide please. So let's talk about other payment types as well. As you all probably noticed, EMV or chip is not the end all be all of payment methods. It has its pluses and minuses. That's why as technology evolves, customers are going to want to pay with other payment types. Recently we've witnessed the development of other payment methods, especially contactless payments like Apple Pay, Samsung Pay, Android Pay, etc. You may already accept contactless in your store or have it somewhere already or have seen it somewhere already. Next slide please. Yeah, thank you. So how did contactless work? Contactless payments rely on a different form of technology called near field communications or nfc. What makes these transactions so attractive for businesses and customers alike? Is that they are fast, convenient and safe. Here's why. First, contactless payments are much faster than chip or even magstripe swiping. For businesses that value line speed, contactless adoption is very exciting. Second, contactless payments can be much more convenient for customers, especially in a world where buyers can leave their wallets at home and just need to tap their phone or watch at a checkout to pay. Third, contactless technologies like Apple Pay are very secure. They use tokenization to toggle cardholder information and biometrics like fingerprints to verify customer's identity. Next slide please. So we've presented you with a lot of information here today and I think the four key takeaways are first, new forms of technology are coming and as a small business owner you will want to be in a position to accept them. Second, there are the liability shifts that happen this month, so at a minimum you will need to prepare for that by being sure that your store can accept. Third, there are a lot of other things coming down the pike too, like Apple Pay and other contactless payments. Fourth, the SBA and Square are here to provide you with the factual information you need so that you can make informed business decisions. With that, let's go to the next slide and let's open up the floor for questions.

Okay, you had many questions that came in, so I'll start with some of the ones that came in earliest. So I'm just scrolling through to make sure I locate the beginning questions. Sorry, there was a lot that came in. Bonnie Lewis asks how much longer it will be until she gets her chip reader that she ordered earlier this summer. I'm not sure if that's something that you can address or not.

Sure. We're currently experiencing pretty unbelievable demand for our newest reader that accepts both chip cards and contactless payments such as Apple Pay, Android Pay, Samsung Pay, et cetera. We will start shipping later this fall and so it really likes when exactly you get your reader will depend on kind of where in the queue you fall because we just had record demand for this reader. But later this fall is a good bet for when you'll receive your reader. We're also going to we're covering any EMV related fraud for any seller who does order that reader. So you don't have to worry about anything if you actually have ordered that reader, even if you haven't gotten it yet.

We have had several participants ask when they will how you will be distributing the link for them to see the video if they were not able to access it during this live web conference and also if they're going to be able to get a copy of the slide show, sure.

And maybe Mary Kate, you can help with this as well. I believe in the registration process you had the ability to you put in your email address and there was a checkbox where you could opt in for more information from Square or Square and the sba. So if you provided, if you check that box and we'll get your email addresses and we'll send out a final copy of the slide presentation as well as a link to the video.

That's right.

Leah, this is Meredith with sba. Shortly, as soon as the presentation, the short clip video and an audio file version of today's entire presentation are ready, we'll go ahead and email that out to folks. And we don't want to hold things up. So if the archived version takes a little bit longer, we'll get the initial short clip video and presentation out to you this week.

Okay, terrific. I have another question that's come in. It says, how do I order a new terminal that is compatible with the chip readers?

Sure. I mean, great question. I know that's on the minds of a lot of small businesses in the US Right now. There's a number of ways and there's a number of different options. So some terminals out there can cost hundreds of dollars and then there's also less expensive options. For instance, our newest reader accepts both EMV as well as NFC payments and is available for just $49. And there are some other companies that offer payments to small businesses like PayPal that also has a reader for I think $149 right now. But really it's talking to your payment processor. So whoever is doing payment processing for you, or perhaps the bank or the merchant acquirer through whom you originally got your magstripe terminal, that's probably the best place to start in terms of looking for a new terminal that will allow you to accept EMV and probably also nfc.

Okay, we have another question asking. I have already ordered one chip card, but I need two. How do I order more? When will you have the Apple Pay readers out?

So I think we can continue to answer some of these questions, but I think what would be helpful for all of those that are participating is to kind of talk more about liability shift and questions related to that. But any questions related to ordering new readers or things like that, you can go online easily and order your card reader there. And I think your question should be answered related to timing on the website as well. Okay, we have a question that came.

In saying, I have 100% e commerce business, so I never actually see the customer's credit card. So it appears EMV adds no value to me. My concern is, will these rules serve to transfer all liability to my business since the cards will not go through an EMV reader. As a side issue, it seems that increasingly commerce is moving to E Commerce, meaning the cards will not be present.

That's a fantastic question. So I think I'll take the first part. The EMV liability shift in the United States is really only affecting the liability structure or the fraud structure for card present transactions. So that's like in store transactions, face to face transactions. And that's because the chip, the primary value of the chip is that it prevents counterfeit fraud. So it blocks the ability for a fraudster to clone or skim the credit card and copy it onto a new card. In that way, the only type of transaction that's being affected in terms of the liability structure is when someone presents with an EMV card and the seller only has a magstripe terminal, so cannot process it as an EMV transaction and therefore experiences an instance of fraud. So for an E commerce only business with 100% E commerce, there's no change in the liability structure. Now to tackle the second point, I don't want to speculate too much on unknowns, but what we can say is that it does make sense logically that when you make card present fraud a little bit harder by introducing emv, that some of the fraud will migrate onto card not present or online transactions. So I totally understand where you're coming from asking that question. That said, when you look at different markets who have gone through an EMV transaction, it's really mixed in terms of what you see. Generally you see a reduction in overall fraud, both card present and card not present. Sometimes you do see an increase in card not present fraud, even though overall fraud is going down. So basically, in certain cases, you do see some of the fraud migrate from card present to card not present. But in some cases you don't. So it remains to be seen in the United States exactly what will happen. But businesses are getting smarter in terms of trying to prevent online fraud as well. So it remains to be seen exactly what the case will be in the United States.

We have another question.

EMV stands for Euro, MasterCard and Visa. Does this include AMEX as well?

Fantastic question. So yeah, EMV stands for Europay, MasterCard and Visa. And it's really just an acronym or a moniker for the set of standards that We've outlined on how you pay with a chip and how you get paid as a business owner using a chip card reader. It does apply to, to American Express, to discover China, UnionPay, all of the other types of card brands. It's just that way back when, about 20 years ago, when EMV was introduced in Europe, the primary institutions that were creating the guidelines and the standards for this new form of payment were Europay, MasterCard and Visa. And so that's why the name EMV has stuck. But increasingly you'll hear people refer to it as chip card technology, smart card technology, and chip and chip. So yes, it definitely applies to all major credit cards.

The next question says sometimes when we run a chip card as credit, the card reader machine will still ask for a PIN number. Why is this since we are running it as a credit card and not a debit card?

Very, very good question. So different cards can have different CVMs. CVM stands for Cardholder verification method. So that's basically the part of the transaction where the card and where basically the seller is trying to verify the identity of the buyer. The two primary ways of doing that verification are through PIN and through signature. So for those of us who primarily spend in the United States, we are very used to signature as the primary cardholder verification method. For those of us who have spent time in other countries like say in Europe, the primary cardholder verification method is PIN entry. And so without knowing the exact details of your situation, it could face that folks are coming into your business with a chip card that was issued from a different country or that was issued in the United States, but is very much an international card and in that case would prefer a PIN CBM versus a signature cbm. But that should be mostly a corner case or a small number of cases, as the majority of cards in the US Are going to be chip and sign or chip and signature cards, as that's the way for right now how we're going to verify Cardholders in the U.S.

Your next question. We provide consulting services. Our customers are not present at our facility. How can we continue to accept card not present transactions without being further penalized by paying a higher transaction fee? Many of our clients are out of state.

Interesting. Okay, so please tell me if this doesn't answer your question. I want to. I'm trying to understand exactly the context. I don't know why there would be an increase in your rate. There really shouldn't be. As it pertains to EMV and the liability shift, there should be no change to the fraud profile or the processing rate that you're being charged because all of your transactions are card not present or CNP transactions. And the only type of transactions in which fraud liability is changing is for card present face to face transactions in which the buyer presents with a fraudulent chip card but the seller is unable to read it, is unable to read the chip, and therefore swipes the card using the magnetic stripe on the back and therefore experiences an instance of so for card not present transactions, whether they are keyed in, whether you type in the numbers, or whether it's online e commerce as we were talking about before, none of those transactions will be impacted by the liability shift.

Another question, I'm not sure whether what you said already answers it, but the question is how is PayPal affected by this new technology?

So that's a good question. I don't want to speculate too much on PayPal in particular, but we can say in general most companies that are processing payments are affected by this new technology in one big way. We need to make sure that our sellers have the ability to accept EMV. So you'll see companies like Square and PayPal and every other company that processes payments and creates terminals modifying the solutions that they offer such that the primary reader or terminal that is being offered to its customers is not a magnetic stripe only terminal, but rather accepts EMV as well. And I think what you'll see going forward is that a lot of these businesses were upgrading from a magstripe only terminal will choose to get a terminal that doesn't only accept EMV and Mag Stripe but also accepts nfc. So if you're going through the process of upgrading your terminal and you're paying a decent amount of money for that fixed cost, what we're seeing more and more is that sellers prefer to kind of fuel their business by being able to accept both contact EMV as well as contactless solutions like for example Apple Pay, Samsung Pay, Android Pay.

Next question. It says we do business to business work. What options do we have in lieu of sending a paper check? We tried the EFT electronic check with Quick Booths Merchant services but had significant problems with that.

Are there other solutions?

Great question. There are increasingly more solutions. So if you were to Google an online invoicing platform, there are many of them. For instance, Square offers invoicing which is done pretty seamlessly through email. In addition, there's new ways to pay new platforms for paying, whether that's peer to peer or business to business where you can move money electronically much faster than with a paper check. So just Again, for instance, there are services like Square Cash Pro where you can actually pay and get paid as a business owner via Square Cash. And all you need to do is enter your business card number. So I would encourage you to look at online invoicing, regardless of whose product that is. And also look at Square Cash Pro, which could be a good solution for you.

Okay, the next question we have is my business takes credit cards over the phone. How will this process, how will process this order? I think they mean how will they process orders from over the phone?

Sure, great question. I know there's a lot of concern for all different types of businesses. So really there won't be much change for this particular business. So again, the chip begins to change the transaction flow when the chip card and the buyer are present. So only in kind of face to face in store transactions. But a chip card is really similar to a magnetic stripe card in terms of the other elements that are at play. So there are still the numbers on the front or sometimes on the back of the card and there is still a magnetic stripe on the back of the card. If the way in which you process payments typically is by having a phone call with your buyer and entering in the credit card number that your buyer gives you, then really nothing will change. You can continue to do that and you won't see any change in the liability structure because it's not a payment where the card is presented in person. So there's no change in liability.

Next question says who will be regulating this new liability shift and who will be handing down penalties and fines? Do you have any examples so far?

I think we can get into the details a little bit more and we can follow up and make information available on exactly who is going to enforce the regulations. But at a high level, basically what's happening is the issuing banks, so the banks that issued credit cards so tank. Take for instance like Chase bank issues credit cards in the United States. For the past, for decades they've been paying for this sort of fraud. So currently, if I go into, let's say I go into the pharmacy down the street and I am a fraudster and I have a fraudulent card and I buy soda, I will get the soda as the fraudster and the business, the pharmacy will be made whole. In other words, they will still get the money. They're not being penalized for that transaction going forward or actually right now because the liability shift just happened. That's no longer the case. If I present with a counterfeit chip card and the business is not able to read that card as a chip card and so it swipes it dead and they experience an instance of fraud the issuing bank. So in this fake example, Chase will no longer cover that liability and it will come in the form of a chargeback. So basically you'll see on your statement, chargeback for $1 for Owen Soda. So it's not a law, it's not a government mandated regulation. You're not going to get a fine or anything of the sort. Rather, it's just a change in the liability structure on payments. So a cost that would have been borne by the issuing bank, say a few months ago is now actually being passed through to the merchant itself.

Okay, next question, next question. It says, please go over where we can order terminals at low prices. This is a major concern.

I think this is something that we've covered before. And you know, we want to make sure that we focus on a lot of other providers out there, not just Square. You know, we can talk for about ourselves but. And obviously you can find out more information on Square Square's website about ordering terminals. But there are a lot of other options out there, so we encourage you to do research before upgrading to a new terminal.

Another question says we have four registers with standalone terminals that are physically removed from each other. Our interest is in getting our customers in and out as quickly as possible. Do we have to have the customer control the transaction or can we process them ourselves? Without an EMV pin, we are considering doing away with our debit PIN pads.

Sure. So there's no regulations or guidance on whether the buyer is performing the action or whether the seller is performing the action. Here's a few things to keep in mind when you're thinking about line speed. So generally a transaction from end to end, like the entire transaction, will be a bit faster if the seller is performing the action. Particularly as we move into the this new world of emv, where there will be a learning curve for buyers to understand how exactly EMV works, how exactly you should orient your card, how exactly you insert the card reader, and then how you have to leave the card in the reader for seconds in order for the transaction to take place. And so having the seller perform the action, especially in the near term, could save you some time. That said, another way to protect yourself is by allowing buyers to pay with nfc, which stands for near field communications. So things like Apple pay, Android pay, Samsung pay, these types of authenticated payments are very secure, just as secure as emv, and in some cases more secure because there's added verification methods such as a Fingerprint and these transactions are just as safe, but they're also much, much faster. So if line speed is the primary thing that you are focused on, but you also want to make sure that you're protecting this, it probably makes sense to explore readers that allow you to accept both EMV and nf.

We have another question that says. Sorry, let me look at it. My business uses Magtech USB card readers that communicate with our software. Is there an equivalent replacement for this type of device and should it be a relatively simple swap or will changes in software client likely be required?

That's a fantastic question and I wish I could provide a really good answer to it, but unfortunately it's really going to depend on what you have now on when you upgraded last. I'm not sure exactly what Magtech is offering, so I can't really speculate as to how the transition process will go for you. That said, the EMV transition should be top of mind for all payments companies right now. So I urge you to reach out to your provider and have this conversation with them and they should be able to tell you just exactly how expensive it will be in terms of dollars and in terms of resources and also time.

Another question came in. It says, I like the way the current square plugs into my phone. I sell merchandise at conventions and I don't have a store. Having the new square be separate from.

My phone may be a problem.

Sure. So I mean, I understand where the seller is coming from. I think we're not discontinuing the classic magstripe reader. So if a seller chooses to accept only magstripe regardless of the security benefits of emv, that's fine. We would suggest for most of our sellers do upgrade to EMV3 protect themselves. There also could be an opportunity for this seller to affix the new reader to the device that he or she is using, if that's preferable. But what we've found from working with sellers who have been using our new reader already, generally putting it down on a table or a chair has worked relatively well.

Okay, we have another one that says, pardon me, if the customer swipes a magnetic strip, but their card has a chip and I have a chip reader, am I still liable for fraud?

Oh, that's a fantastic, fantastic question. So the answer is that that's really not going to happen. So for every chip card terminal, it's going to accept both chip cards and it will also have a for magnetic stripe, the data that's on the back of your card on the magnetic stripe actually contains information that says whether that card is a magstripe only card or if it's a magstripe and chip card. And so if a buyer or a seller swipes a chip card, the reader will say will basically prompt the buyer or seller to insert the card so it can process it as a chip transaction. So the vast majority of the time it will be very. You won't be able to just swipe a chip card because the reader will tell you to insert the card.

Okay, we have another question that says we have had customers use a chip card for credit and the reader wants a PIN number. However, the customer is not aware of a PIN number. Can you bypass the PIN number?

Yes. I'm not exactly sure on what the card was or what the particular setup was. There are some cards that will prompt the buyer for a PIN number. I'm not going to repeat the whole, the whole story on cardholder verification methods, but generally in that case the buyer should know what the PIN number was. So maybe this was a new card and the PIN number had not been set up. I'm not exactly sure what's going on, but for most sellers, the vast majority of the time the verification method will be signature and not pin and the reader should not prompt for PIN entry.

Next question. As a merchant, under what circumstances may I request a photo id? I currently ask for ID when the card is not signed or the card.

Asks that photo ID be requested. Yeah, so unfortunately that's something that we can't really answer as the payment services provider. I think, I think that's something that's up to the small business themselves. For us, we're focused on the actual card terminals. But thanks for the question.

I'm trying to just kind of sort through some of these or repeat questions. So I don't think I've asked this one yet. It says my payment processor has been slow in supplying me with a terminal. I do not have a date when it will come in. Would my payment processor be liable for fraud until I actually receive my reader?

So that's a good question. It depends on the payment processor. We can't really speculate. There are a lot of different payment processors out there. I can say that if you pre ordered the card reader with square and it was the, the new contactless and EMV chip card reader. We are covering any potential fraud liability until you receive that in the mail. But as for other providers, we're not sure what they're doing.

Okay. This is another similar question to all the presenters. Two questions. First what is the difference between chip and PIN versus chip and signature? Second, how is it that businesses are liable when the vast majority of point of sale equipment providers used by small business still have no equipment available? Yes.

So I think that's a two part question. The first question I think we answered a couple of times with respect to the difference between PIN and magstripe and what the difference there is. I'll let you, Owen, take the explanation on card readers, but essentially it's the responsibility of the business themselves to upgrade the technology and your payment services provider should be helping you do that. And if that's not the case, you should look into finding another payment services provider.

Yeah. And we are seeing a pretty fast acceleration in both the number of chip cards out there in the United States, but also the availability of chip card reader. So I'm not, I can't validate whether or not it's true that the vast majority of service providers don't have equipment right now that would enable you to accept emv. I hope that's not the case. I know Square has several options that allow our sellers to accept emv. And so as Leah said, perhaps it would make sense to explore other opportunities that would allow you to accept emv. But that in any case, we're going to continue to see a pretty fast uptake of EMV over the next several months in the United States.

Our next question says if a customer presents a chip card and the merchant does not have a chip card reader yet, would the merchant be better off processing the card as card not present, keying in the numbers, would that relieve the merchant from liability?

No, that would not remove any liability. So if a buyer presents with a chip card and if that chip card happens to be happens to have a fraudulent card number or fraudulent nag stripe and the seller reads the card via swiping it or via card not present, that is keying in the number, the liability will be the same, which is that the merchant will be liable for that instance of fraud.

We have a question asking what is Square? Is it the name of a company? Where is it located? Sure.

So Square is a company where? In San Francisco. We are a payment services provider and we not only provide card readers but also a lot of services for small businesses. And our partnership here with the SBA is focused more on education with a lot of small businesses that we have serve. We've learned a lot about what small businesses need and the questions they have and have seen, particularly with respect to this liability shift and the transition in payment technology that There are a lot of questions. So the SBA and Square have partnered together to talk about and do more in order to get more education out there. So that's kind of the genesis of this partnership. That's why we're trying to focus more on the technical questions about EMV and liability and less about our specific products. Next question.

It says, I assume debit cards will also have a chip on them. When do banks and credit card companies have to issue new cards with the chip in them?

Great question. So you're right to assume that debit cards will also be chipped over time. The liability shift that we're experiencing for credit cards right now is actually a bit later for debit cards. One of the reasons you can imagine is that it's pretty expensive to replace an ATM machine or to replace a payment terminal that allows you to enter pin, and so giving a little bit more time to those sorts of cards, debit cards in particular. And there's no. There's no law or exact date by which all the credit card companies need to issue new cards. But we're seeing quite a bit of acceleration in chip card issuance in the past several months. So we're probably at about 30 or 35% now. Even I know the presentation said about 25%, but this continues to go up every day in terms of the. The share of cards in the US that have chip. And we'll continue to see this increase over the coming months and years such that the vast majority of cards, maybe 75, 80% of cards have chips in them at the end of next year. We're moving pretty quickly.

For those of us who are waiting on our chip card reader, what tips do you have to protect ourselves in the meantime?

Well, it depends on what payment processor you use. So I guess what we would say is do whatever you can to get your new terminal so that you can. So that you're protected. And like we said before, something that Square is doing is protecting our merchants until they get the card reader in their hands. So I would contact your payment services provider to see what they can do for you to make sure that you're protected until they're able to give you the card reader that protects you yourself.

Next question. Does the chip reader work independently from your smartphone, or can you plug it into your phone? What will Square do to help me if the reader is stolen?

So we really do want to shift the focus away from Square products in particular. This is not about Square. We want to educate small businesses. But for the sake of the question Currently, the reader does not plug into your phone at all. It's separate and it connects via Bluetooth technology. I'm not exactly sure what the process would be if your reader was stolen. It depends on what insurance you have and all of that. The good news is that the square reader is only $49, as opposed to other terminals, which can cost hundreds of dollars.

Yeah. And as you're looking through the questions, if you can select ones that are more focused on the EMV and the liability shift, that would be helpful for.

The several of those have come in. Okay, let me go to the next question. This one says, has there been any problems with the chips being read by card readers? For instance, like when the magnetic strip would be worn down and not be.

Able to be read by card readers?

Great question. So I would not say that this is prevalent at all, but it's certainly possible. You can have a damaged chip. And so generally what will happen is if a buyer has a damaged chip and tries to read the chip on the card, so it tries to process the transaction as an EMV transaction and it fails multiple times, then we have what's called technical fallback, which means you can then swipe the card to read the mag stripe on the back, but only if the chip is damaged.

Okay, If there's another question that came.

In, it says.

If there are further questions about liability, who is a good resource for information?

Sure. So many companies, Square, PayPal and the major card networks, Visa, MasterCard, American Express, et cetera, have great resources on their websites and on their blogs. Of course, the SBA has great information. This information will be given to all of you. And then there's also a company called EMV Company, which has done a lot of work just on educating sellers on what the implications of EMV and the liability shift are. So you can just Google emvco, and that will be a great resource as well.

And also if you want to go to the next slide, I think we have a link both to SBA's website as well as Squares. For our EMV specific information, it's squareup.com EMV and then we also have a blog called Town Square, but we'll email that out to the list of folks that opted in as well. And I think we have time for one more question.

Okay. Okay, I'm looking at the last ones that have come back in. We have a technical question asking, can we install these new readers easily?

Do they require software to operate? So again, that is dependent upon what payment processor you're working with. There's always software linked to to the reader. In Square's scenario, you have an app that you download from the App Store and it connects with the reader itself. Well, just we want to take this opportunity to thank everybody for taking the time today to participate in this webinar and asking great questions. Again, for those of you that have opted in for more information from Square and sba, we'll be sending out a full follow up email with a copy of the presentation, a link to the video, as well as a link to the recording of this webinar. And you'll be able to find any more follow up information with the links to our websites and stay tuned for future webinars. Thanks.