Was fortunate to be on a call with market state and network leaders today and to hear speakers including Kim Lyons, a long time supporter of small retailers at MerchantSource®; she gave us a great overview today of the chip and pin enabled devices/aka EMV devices/aka smart card technology that is coming down the pike. Here is what I heard, and as I get updates I’ll post them here and if what I wrote here needs to be corrected by my more able colleagues, I’ll also update. But since I know many markets don’t have state or network support systems, I felt it was necessary to get this on radar screens asap.
Chip and pin technology has existed for many years in Europe but had not been pushed in the US market- that was, until some of the worst breaches of cards ever seen happened in the past year, including the Home Depot and Target breaches (although some reports indicate that last particular breach may not have been solved by chip and pin technology!) Nevertheless, chip and pin technology is coming and coming soon.
This technology means credit and debit cards contain an embedded microchip and are authenticated automatically using a PIN. When a customer uses a card, it is placed into a “Point of Sale” (POS) terminal, which connects to the chip on the card. To complete the transaction, the customer enters a 4-digit PIN. These new technologies are meant to reduce the likelihood of breaches, especially at the merchant level! This is also true of new app-based systems (also called “contactless systems”) like Apple Pay which allow a user to upload credit cards to their iPhone 6 and use encrypted “near-field technology” to just tap the smart phone to the merchant pad. The card never leaves ones wallet in those cases.
This chip and pin technology directly relates to all debit and credit but not presently to EBT only technology because EBT uses a different software kernel (system). However, many expect FNS to address this issue with changes in their technology sooner or later.
Important to note: This technology is for “card present” (CP) transactions and so internet or phone based transactions aka card not present (CNP) transactions will need their own version of chip and pin; some exist already. Of course, markets are not usually running CNP transactions so this is less of an issue right now for physical farmers markets.
There is a great deal left to learn about these issues as markets move into the next generation of technology. What is crucial to understand right now is the expected deadline of October 2015 for having this emv/pci compliant technology will shift liability of any breach on to merchant’s shoulders rather than the merchant providers of Mastercard/Visa etc. After that expected date of October 2015, in order for liability of any breach to stay with the merchant service providers, it will be necessary for any retailer to have these integrated pin pads or systems at that point. That means either adopting brand new card technology or app-based services like Apple Pay or upgrading their existing magnetic stripe only capabilities.
Once again, this technology is not directly related to EBT right now as a different type of technology so EBT only machines are not affected at this time but rumors abound of possible changes…
*TL/DR: Markets or state associations need to know if their merchant service providers or app-based solutions are emv/pci/contactless compliant. This new technology needs to be embedded into their pin pads or new technology by October of 2015 or the liability for any breach shifts to the merchant (read market). That entering into any lease system for readers at this point may mean getting technology that is “end of life” and cannot be upgraded or may mean paying for equipment after its technology is outdated. (Leasing versus renting contract language also needs to be understood by the buyer!) So, state associations, national partners and advocates for farmers and markets are working hard to understand these issues and to find resources for markets and farmers to understand the issues that will arise.
What was also raised on this call was Farmers Market Coalition’s new contract with FNS to administer 3.3 million in support grants to markets for EBT systems and 700,000 in replacement equipment. I am sure that system along with the existing Marketlink system (which is an entirely separate program from FMC’s contract and supports NEW EBT systems for markets and for market farmers) are both going to work diligently on making sure these new systems are addressed.
Start reading up, folks.
* internet slang for “Too long; didn’t read”