European Import

Used in Europe since the 1990s, credit and debit cards with embedded chips are finally available in the U.S. after years of delays, and retailers are spending about $30 billion to install the compatible equipment, according to the National Retail Federation. The technology makes it more difficult for criminals to clone stolen cards compared with those with only magnetic stripes. That could help limit the fallout from retail hacks, such as the massive breach at Target in 2013.

Yet the Oct. 1 deadline that Visa Inc., MasterCard Inc. and other credit-card networks set for most merchants was ill-timed, just ahead of the holiday season, which accounts for 19 percent of retailers’ $3.2 trillion in annual sales, according to the NRF. The Food Marketing Institute, which represents supermarkets and pharmacies, even tried to get it postponed.

‘Forcing Anarchy’

For smaller merchants that switched recently, so close to the start of the hectic shopping season, it could mean potential chaos. Black Friday is typically one of the busiest shopping days of the year.

“We are forcing anarchy,” John Drechny, senior director of payment services at Wal-Mart, said at the Money20/20 conference in October. The world’s biggest retailer began accepting chip cards in 2014 and has had time to adjust, he said.

Cinnabon plans to install terminals capable of reading chips in more than 80 of its 250 mall-based bakeries by early next year, according to President Joe Guith. The main goal is to upgrade old point-of-sale equipment to new Revel gear and add new features, he said. Risks of fraud at the chain, whose average check is $6, is minimal, so Cinnabon has been in no rush to implement the new technology during the holidays, he said.

“This is our peak period, and making sure we can move transactions quickly enough is critical,” Guith said.

‘Just Slower’

At Panera, which sells baked goods, sandwiches and salads, 20 additional seconds would reduce the speed of the checkout process by 20 percent, said Blaine Hurst, chief transformation and growth officer.

“We might have been able to push it out during the holiday season, but we want to test this out and not disrupt the holiday season,” Hurst said. “There’s a higher probability that someone will leave that card, and it’s just slower.”

To speed up checkout times, department-store chain Macy’s is adding salespeople equipped with hand-held devices to check out customers from anywhere in the store, a strategy known as line busting.

But even with months of preparation by merchants, checkout time for people using chip cards could be a third longer than for those swiping the old magnetic stripe, said Richard Crone, chief executive officer of Crone Consulting LLC, whose associates monitored lines around the country.

“I don’t see any retailer being ready,” Crone said. “They’ll be taken to the court of social media.”
 

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