Square Unveils Plan to Support U.S. Credit Card Security Overhaul
Square on Wednesday announced it was developing a new credit card reader that would allow businesses to begin accepting a more secure type of credit card being rolled out in the U.S. over the next 15 months.
The announcement comes as credit cards embedded with microchips finally begin to reach American consumers. The cards, which have been common for a decade in many other parts of the world, are believed to be harder to clone than traditional stripe cards.
Beginning in October 2015, liability for credit card fraud will sit with whichever entity — the issuer or the merchant — is using the less secure equipment. So a merchant would be penalized if it doesn’t have the equipment to accept chip cards and suffers an unauthorized purchase with a card that had a chip in it. On the other hand, the bank would be liable if it doesn’t issue chip cards and one of its customers makes an unauthorized transaction with a traditional card at a store that accepts chip cards.
(Note: The more-secure technology requires chip cards to be inserted rather than swiped, but chip cards retain the old-timey stripe on the back so they also be swiped when necessary.)
Square says it will start making the new card readers available early next year. Some of Square’s competitors have already rolled out new hardware.
A few questions remain. First, how much will the readers cost? The only guidance Square is giving is that the devices will be “affordable.” Depending on what “affordable” means, there’s the chance some businesses that rarely are a victim of fraudulent purchases could take their chances with the older equipment.
Secondly, what does unveiling this new reader mean for Square’s possible expansion plans? In the U.S., shoppers who use a chip card will simply have to provide their signature to complete a transaction. But in Europe, shoppers often have to punch in a pin code instead of signing. Will Square use this new reader along with some type of point-of-sale software upgrade to move into Europe? Or is a different device on the way? The company isn’t saying.
The “technology that we’re designing is definitely a step towards building the solution for other international markets,” was as much as a spokeswoman would say in an email.