More than a third of small-business owners won't accept EMV chip cards by Oct. 1 — and don't plan to do so any time in the future – but they may change their minds if the decision costs them as little as $100 in fraud losses.

As mandated through the major card brands, most companies not able to handle EMV transactions by Oct. 1 take on the liability for fraud (gas stations have an extra two years). But the upgrade to EMV is costly, and many merchants do not yet see the value in adding EMV technology to all of their systems.

But even the most stubborn merchants could change their minds as EMV technology spreads, according to new research from payments processor and technology provider Cayan. EMV-chip cards are designed to resist counterfeiting if lost or stolen, but the security can only work if the merchant has the proper technology in place to detect the chip.

The expense of fraud or customer complaints about not accepting EMV cards are two factors that merchants said could sway their opinions about migrating to chip card acceptance, Boston-based Cayan reported in a survey of 344 small business owners and managers.

Of those with no plans to accept EMV cards, 63% said that being forced to cover fraud costs would drive them to EMV capabilities.

"It's clear that for some [small businesses], they're going to learn the hard way before adopting EMV," said Harry Hargens, vice president of business development at Cayan.

In an indication that small merchants have a low threshold for fraud pain, 47% said they would become EMV-ready after covering $100 or less in fraud. Even more telling, 60% of the businesses surveyed indicated they could not bounce back from a fraud incident that cost them more than $500 out of pocket.

With the average merchant suffering 133 fraudulent transactions in 2014, small businesses unprepared for the EMV liability shift could be in big trouble, the report stated.

If fraud doesn't sway these merchants, customer complaints might, as 57% said if enough shoppers complained about the absence of EMV security, they would consider adding it. Forty percent of respondents said they would upgrade after receiving five or fewer complaints per week.

Only 16% said they would become EMV-capable after hearing about another business being held liable for fraudulent charges.

However, it would be a mistake for small merchants to feel that deploying encryption and tokenization alone would keep their customers' data secure, Hargens said.

"The value of EMV is in the unique information the smart chip generates per every dip of the card," Hargens said. "This helps eliminate fraud at the point of sale due to counterfeit cards."

In order to get small businesses on board before the deadline, some merchant service providers are selling the benefits of mobile payments over EMV, because new EMV-capable payment systems will allow businesses to accept both payment types.

According to Cayan's study, this strategy does not match merchants' thinking. Sixty-three percent of small businesses have no plans to accept mobile payments — double the number of small businesses with no plans to accept EMV.

Cayan did not differentiate small business segments in its study, but it has become increasingly apparent that restaurants will be slow to convert to EMV, in part because those establishments don't fear fraudulent chargebacks in the same manner other stores might.

At the start of this year, Merchant Warehouse changed its brand and business model, becoming Cayan. The company continues to provide merchant services contracts, but also emphasizes its payment processing and gateway technologies.

Last month, Cayan earned Level 2 EMV certification as a payments software provider from standards body EMVCo.

Cayan's Genius platform supports Near Field Communication-based mobile payments, QR/bar code payments and manually entered and swiped credit and debit transactions.

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