It's bigger than the introduction of the magnetic stripe on cards way back in the late 1970s and early 80s...
 
Bigger even than Y2K and the need to upgrade terminals because cards were issued with year 2000 expiration dates.
 
What's so big this year is that in October there will be a dramatic shift in the way fraudulent or counterfeit transactions are handled. The shift could bite your practice if you're not prepared.
 
Today, if your practice accepts a counterfeit card and do everything else correctly, you don't hold any liability for that chargeback. The bank that issued the card is responsible for the loss.
 
After October first, the loss may be your responsibility.
 
The reason for this change, known as the "liability shift," is that the card networks (Visa, MasterCard, Discover and American Express) all have changed their rules to allow for the liability on a counterfeit card, and in some cases a stolen card, to fall to the physician.
 
The liability shift is coming about because of the use of the new EMV or "chip cards" or "smart cards." These are cards that have an embedded chip. Banks and credit unions are issuing the chip cards to consumers now, in preparation for the liability shift later this year.
 
If you have not already upgraded your credit card terminal to accept chip cards, you need to seriously consider the impact that not upgrading will have on your business after October 1. While there is no requirement that you upgrade your terminal, failure to do so could expose you to chargebacks you don't currently see in your business.
 
Because there are two parts to this relationship between the issuing bank and your practice, there are several different scenarios that could play out at after October 1:

1. You chose not to upgrade your terminal and a patient with a non-chip card pays for their visit. This is identical to what happens today, and there is no change in the liability. The issuing bank is still responsible for counterfeit transactions.
2. You upgraded your terminal and your patient uses a non-chip card to pay for their appointment. Same thing, you are not responsible for the bad transaction.
3. You upgraded and your patient presents a chip card for payment. No change in liability here, either. The issuing bank is still responsible for the bad transactions.
4. You chose not to upgrade and your patient presents a counterfeit chip card at your practice. You are responsible for the chargeback, even though you did all of the other things correctly.

Obviously, #4 is the cause for concern and confusion in the physician community. Since you have the least secure system (non-chip card ready) you bear the risk of the counterfeit card. In some cases, you may also assume some additional risk in the world of lost or stolen cards.
 
The big question, then, is... should I spend the money to upgrade my terminal?
 
As a practicing physician seeing many patients every day, I would suggest that, yes, you should upgrade -- you can pay for the cost of a new terminal (about $500) with just one "bad" transaction.
 
At the end of the day, the new rules do not mandate that you abandon your current equipment, and the big change that's coming will not prevent you from doing business after October 1. However, you must decide if the risk from the changes is worth the cost of the upgrade.
 
If you have questions about this or any aspect of the merchant processing world, please don't hesitate to contact Kevin McFatridge, MSMS Director of Marketing, Communications and Public Relations, at kmcfatridge@msms.org or 517-336-5745. As a member of MSMS Practice Solutions, the Michigan Retailers Association provides discounts on these products and services to MSMS members. If you'd like to get started with a new terminal, please contact Chris Smith at csmith@retailers.com or 517-327-8972.