SF businesses struggle to switch to credit chips

SAN FRANCISCO (KTVU) -- The U.S. will likely miss the target date of October 1st to transition the nation from old credit card magnetic strip transactions to a more secure credit card chip system that has been used for years in Europe to prevent credit card fraud.

President Obama signed the executive order in October 2014, but one year later, some people still have not received their new card yet with the square chip on the front.

Many businesses also have yet to install new card readers.

Canela Bistro and Wine Bar's Chef/Owner Mat Schuster already has plenty on his plate, serving up food to customers. He says it has been difficult preparing for the big shift in processing credit cards.

"For chip and signature you have to physically dip it into the machine instead of doing a swipe," Schuster said, "The liability is getting pushed more from the credit card issuer to the actual retailer or merchant."

Starting October 1st, liability for fraudulent transactions could be shifted to businesses if they aren't using the new card readers or to banks, if they aren't using the new chip cards.

The new cards are similar to the EMV or Europay, Visa, MasterCard system widely used in Europe.

"There's software or coding in the chip itself and it's embedded in the credit card," said Judy Lee, the Golden Gate University Business School Chair of IT Management.

Professor Lee says the chips are more difficult for criminals to duplicate and they provide added protection against hacking attacks.

Instead of swiping the magnetic strip which sends your credit card number and personal information, the chip verifies your credit but tracks purchases through encrypted codes.

"It creates a unique code that only is tied to that particular transaction," Lee said.

Customers say they like the idea of more security.

"My American Express and MasterCard both have the chip and I've used them at McDonald's and Walgreens," said Cameron Ayers, a San Francisco resident who says prior to the new chip cards, he had been victim of credit card fraud.

One problem for small businesses, however, is that many point of sale providers are still refining their technology or are charging hundreds of dollars to switch over.

Gwyneth Borden, the Executive Director of the Golden Gate Restaurant Association, says that makes the transition difficult for their members.

"With all the uncertainty, a lot of restaurateurs don't feel comfortable making the investment at this point," Borden said, "We would like a consistent standard and have everyone get on the same page."

"Probably less than 30 percent of the merchants and banks are ready to go. Visa I think is something about 20 percent," Professor Lee said.

Many people say it's a step in the right direction, but consumers should be aware that the chips won't protect online purchases when you enter a card number.

Also, gas stations have been given another two years until 2017 to make the transition due to the costs of replacing pumps.

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