Let’s say the waitress forgets to refill your water and brings you the wrong entree. Come time to pay, you can avoid a face-to-face confrontation and simply signal your displeasure with a tightfisted tip.
Soon it won’t be so easy to leave a goose egg for the server who forgets your eggs: In October, when new microchip- embedded credit cards become the standard across the country, diners and bar patrons will have to make their tips known before their cards are swiped.
Gone will be the days of scrawling a hastily calculated tip on a receipt. Paying with a chip card will require customers to either tell servers a tip amount before a transaction is authorized or ask customers to key in a tip themselves if an establishment has a tableside checkout terminal.
It’s all because of an Oct. 1 deadline for merchants — including restaurants or any other establishment that accepts credit cards — to upgrade to new payment terminals designed for the microchip-embedded cards, also known as EMV cards.
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With chip cards, “once you insert that card into a terminal and complete the transaction, you cannot go back and adjust the tip, or add one once the card has been removed,” said Andy Goranson, president of Omaha-based processing and technology company U.S. Merchant Payment Services.
The chip-embedded cards are supposed to be less prone to fraud than the traditional cards with magnetic stripes. They’ve been the standard in Europe and elsewhere for years, but they’re just now being mandated in the United States.
After Oct. 1, liability for fraudulent transactions made with counterfeit cards shifts from banks to merchants if the merchants haven’t upgraded their credit card equipment. New chip cards also include the familiar magnetic strip so customers can use them — and tip — the old-fashioned way on equipment that hasn’t yet been upgraded.
At restaurants and bars, the new cards mean customers and servers will face new, potentially uncomfortable exchanges come time to pay: Under the new system, the waiter will present you with a bill, you’ll add the tip and calculate the total. Then he’ll take your card and process it all at once.
“That conversation about tipping is now right there, and customers are on the spot,” Goranson said. “It’s going to blow people’s minds.”
Cary Dunn, owner of the Fat Shack barbecue restaurant at 30th and Weber Streets, said he sees only a couple of chip cards a day, and because much of his business is takeout orders, tipping hasn’t yet been an issue.
But, Dunn said, “once you pull the chip (card), you can’t do anything else,” like adjust for a tip. “That’s one of the security features of the cards.”
In the meantime, it’s a big process for every merchant to upgrade its payment systems. Of nearly two dozen Omaha- area restaurant managers contacted by The World-Herald in the past week, only three knew about the new chip-card terminals and how they differ from existing technology. Many said they were unaware of plans to upgrade payment systems any time soon.
That could be a big problem, Goranson said. One of his local restaurant clients recently missed out on a big tip after learning the hard way that tips can’t be adjusted on chip card transactions. The customer had paid with a credit card and expected to add the tip after it was processed — in other words, doing things the soon-to-be old way.
Only 32 percent of 600 business owners surveyed last month by Wells Fargo said they were aware of the Oct. 1 deadline, and just 31 percent had the new equipment needed to process cards with chip card technology.
A consortium of credit card issuers has set the October deadline — it’s not a government mandate, but the issuers are adding some oomph to the push to get merchants to upgrade by shifting the liability onto them if they stick with the outdated processing equipment beyond Oct. 1. (Right now, card issuers themselves are responsible for fraudulent purchases, generally speaking.)
Meanwhile, roughly one in 10 Americans has received new cards equipped with the required technology, according to a recent poll of more than 1,000 people. GfK Public Relations, which conducted the poll for the Associated Press, also found that only 35 percent of those with the new cards have used them as they’re intended to be used.
Additional research from payments consulting firm Javelin Strategy & Research estimated that only 25 percent of merchants would meet the Oct. 1 deadline; still, banks issuing cards have as much responsibility to educate their customers about chip cards as merchants do for their customers, said Nick Holland, Javelin’s head of payments.
Omaha-based coffee chain Scooter’s announced last week it started installing new chip card-compliant terminals across its chain of 125 stores. It expects to have the new devices in all stores by the end of the year.
“It’s extremely important as an emerging brand that we can position ourselves on the national playing field” with new technology, said Scooter’s spokeswoman Jamie Hamburg.
Local software developer TruBeacon engineered the software on the Clover brand terminals used by Scooter’s. Clover is owned by payments behemoth First Data, which processes about half of all card swipes globally and has about 5,000 employees in Omaha.
The microchips in the cards are supposed to make payments more secure because data sent to authorize payments on the cards are shrouded in a unique code generated at the time of payment. Even if a crook gets hold of the code, he can’t use it to make other purchases, because it is good for only a single use.
By contrast, standard cards contain sensitive payment information that is stored on a magnetic stripe that can be exploited using numerous inexpensive techniques.
Contact the writer: 402-444-1534, cole.epley@owh.com