1) Small businesses face a deadline of October 1st to upgrade their payment systems to accept new credit and debit cards with computer chips, otherwise they will be liable for fraudulent transactions made with counterfeit chip cards. 2) The transition to chip cards is expensive for small businesses, costing anywhere from hundreds to tens of thousands of dollars due to needing new card readers and payment processing software. Large retailers receive volume discounts that small businesses do not. 3) While the new systems will help reduce fraud, small businesses struggle with the costs and technical challenges of installing the new chip-enabled payment systems themselves by the deadline. They will likely need to hire outside technology consultants for assistance.

1. BusinessBusinessOBSERVER-REPORTER MONDAY, JUNE 22, 2015
CALL724-222-2200To start a subscription to the O-R
PAGE B5
ByJoyceM.Rosenberg
AssociatedPress
NEW YORK – New credit
anddebitcardswithcomputer
chips are putting the squeeze
onsmallbusinesses.
The cards being rolled out
bybanksandcreditcardcom-
panies are aimed at reducing
fraud from counterfeit cards.
As chip cards are phased in,
magnetic stripe cards, which
are easier for thieves to copy,
willbephasedout.Businesses
ofallsizesfaceanOct.1dead-
line to get new card readers
and software that can handle
chips.Mostestimatesoftransi-
tioncostsforsmallcompanies
varyfromthelowhundredsto
tensofthousandsofdollarsdue
tothewiderangeofequipment
used.
Ifbusinessesdon’tmeetthe
deadlinesetbycompaniesin-
cludingMasterCard,Visaand
American Express, they can
be held liable for transactions
madewithphonychipcards.
The switch to new chips in
creditanddebitcardsposesa
threatforsmallcompaniesbe-
causetheycan’tgetthevolume
discounts on the new equip-
mentthatbigretailersget.And
they don’t have in-house tech
experts to install the new sys-
tems.
“This is one of the biggest
nightmares merchants are
going to face,” says Michael
Kleinman, owner of Mason
Eyewear, a store in Brickell,
Florida, and Centurion Pay-
mentServices,acompanythat
processescreditanddebitcard
payments.
Tip of the iceberg
The card readers shop-
pers see are just one part of a
payment processing system.
They’reconnectedtosoftware
inamerchant’scomputersys-
temthatreceivesthetransac-
tion information and sends it
to a payment processor. The
processorthenpostsacharge
ordebittothecardholder’sac-
count and a credit to the mer-
chant’saccount.
The simplest card readers
usedinstoresandothersmall
businessesarelikelytocostat
least $100. The machines will
also read magnetic stripes
and some also handle what
areknownascontactlesspay-
mentsmadewithserviceslike
Apple Pay or Google Wallet.
Most software prices start at
several hundred dollars, but
canrunintothethousandsfor
morecomplexsystems.Many
companieshavecomputersys-
temsthatdomorethanhandle
payments – they also manage
inventory and customer and
vendorinformation.Business-
es like restaurants and those
with multiple locations are
likely to have the most com-
plex systems and the highest
expenses.
DickieBrennan&Co.,which
operatesfourNewOrleansres-
taurants, expects to pay more
than $25,000 to replace card
readers and software, says
Derek Nettles, the company’s
informationtechnologydirec-
tor. The company won’t raise
itspricestopayfortheswitch;
instead, it’s delaying an up-
grade of its security camera
system.
“We’renothappyaboutthe
additional expense,” Nettles
says.
It’s not plug and play
Changingcardreadersand
softwareisn’tsomethingmany
small business owners, even
tech-savvyones,willbeableto
do on their own. They’ll need
tohiretechnologyconsultants
who can charge as much as
$100anhourormoretoinstall
thesystemandensureitworks.
Even with Kleinman’s ex-
pertiseinpaymentprocessing
as owner of Centurion Pay-
mentServices,ittookhimfive
hourstoinstalltwocardread-
ers and software. And he was
onthephonegettingtechnical
supportfromhisvendorwhile
hedidit.Althoughthenewsys-
tem works, there are glitches
that keep him tinkering. For
example, sometimes the sys-
temhastroubleacceptingcer-
taincards.
“Most people are definitely
goingtoneedtohiresomebody
todoit,”Kleinmansays.
Itmaymakesenseforcom-
panies with combined pay-
ment,inventoryandothersys-
tems to separate the payment
part to make them less vul-
nerable to hackers, says Scott
Shedd,atechnologyconsultant
withWGMAssociatesinScott-
sdale,Arizona.
Butthatwilladdmorecosts,
says Avivah Litan, an analyst
withGartnerResearch.
“If you want to use this op-
portunity to secure your sys-
tems, it could cost you thou-
sands,”shesays.
New chip credit cards putting squeeze on small businesses
Chipcardtips
Hey small business owners: If you haven’t prepared for the
transitiontochip-embeddedcreditanddebitcards,youdon’t
havelong.HerearesometipstohelpyoumeettheOct.1dead-
linetogetnewcardreadersandsoftwarethatcanhandlethe
chips:
• Before ordering new card readers and software, be sure
they’ll be compatible with your payment processor’s sys-
tems.Checkwithyourprocessortoseewhichequipmentyou
shouldbuy.Someprocessorssellcardreaders,andtheymay
offerdiscounts.
• Hire a technology consultant to install the system if you
don’thaveanin-housetechexpert.Theinstallationcantake
hoursandtherearelikelytobeglitchesthatevenatech-savvy
ownerwon’tbeabletohandle.
• Companies whose credit card payment systems are com-
binedwithinventorymanagementandothersystemsmight
want to separate the payment part.That would make their
computerslessvulnerabletohackers,whohavebeenableto
gainaccesstocustomerandotherinformationatcompanies
likeTarget Corp. by invading another part of an integrated
computersystem.
•Your payment processor or bank should be able to answer
questionsaboutthetransitionandwhatyou’llneedtodo.You
canalsogetinformationonlinefrom:
Visa:http://tinyurl.com/obkop6g
Discover:www.discovernetwork.com/chip-card/merchants
Intuit:http://tinyurl.com/nf3g23w
SMALL TALK
Associated Press
Service manager Morgan Mallory holds a Rail tableside
credit card processing device at Tableau, a Dickie Brennan
& Co. restaurant, in New Orleans. Dickie Brennan & Co.,
which operates four New Orleans restaurants, expects to
pay more than $25,000 to replace card readers and software
once chip cards are phased in and magnetic stripe cards,
which are easier for thieves to copy, are phased out.
ByMichaelBradwell
Businesseditor
mbradwell@observer-reporter.com
In the six months that have
passed since completing its
mergerwithFirstFederalSav-
ings Bank, the numbers have
been very good for CB Finan-
cialServices–ashastherecog-
nitionoftheperformance.
The results of the Carmi-
chaels-based bank holding
company – better known for
its Community Bank badge –
have earned the notice of the
American Bankers Associa-
tion,whichrecentlyplacedthe
companyonitstop200publicly
traded community banks and
thriftswithlessthan$2billion
inassets.
But as Pat McCune, CEO
of Community Bank and CB
Financial Services, notes, the
designationisanindicatorthat
the Carmichaels-based bank
hasmovedontoahigherrung
ofthebankingindustryladder
foravarietyofreasons.
“Themergerhascatapulted
Community Bank to a higher
level of performance in many
regards,” McCune said last
week in discussing the bank’s
major events of the last half-
year.
While the bank haD been
recognized in the past for fi-
nancialperformance,itspost-
merger size puts it in a differ-
entclass.
“We’re in a different peer
groupnow,”McCunesaid.
In addition to its inclusion
intheABA’sTop200publicly
traded community banks, CB
Financial, which now trades
ontheNASDQExchange,also
received the highest ranking
from an independent rating
firm.
An index stock
Earlier this month, CB Fi-
nancial was notified by the
ABAthatithasalsobeenadd-
edtotheprestigiousABANAS-
DAQCommunityBankIndex,
which,becauseitiscalculated
onbothatotalreturnandprice
return basis, has been em-
braced by the financial com-
munityasabenchmarkforthe
communitybankingindustry.
As of June 1, the index in-
cluded 367 community banks
with a total market capital-
ization of $199 billion. It is re-
ported daily on aba.com and
through all financial data ser-
vices under the ticker symbol
ABAQ, and is reported daily
in ABA’s flagship publication
AmericanBanker.
TheABA’sTop200designa-
tionisbasedonabank’sthree-
yearaveragereturnonequity
–howitreinvestsshareholders’
investments,aswellasreturn
onaverageassets–howitrein-
vests the assets of depositors.
Other metrics include net in-
terest margin, net income as
wellasloangrowth,whichthe
associationnotesiswhatsepa-
ratestopperformersfromalso-
rans.
“The overall group of 750
institutionsthatfitthecriteria
for our ranking had median
noninterest expense growth
of 2.91 percent last year,” the
ABAwrotewhenitreleasedits
listattheendofMay.
“But they also posted me-
diannetloangrowthof7.3per-
cent,whichcontributedtome-
dian revenue growth of 3.41
percent.”
Initsintroductiontoitsanal-
ysis,theABAnotedthediffer-
ence between cost-cutting at
banksversustheabilitytogen-
eratemoreloans.
“Thoughcostcutshaebeen
afocusacrosstheindustryfor
years,” the ABA wrote, “non-
interestexpensesforthisgroup
ofcommunitybankscontinued
to rise in 2014, according to
Capital Performance Group’s
analysis. The trend could be
worrisome, CPG said, if the
extra spending had not been
offsetbyextraincome.
“Those that earned a spot
in the top 200 – as ranked by
theirreturnonaverageequity
acrossthreeyears–setthem-
selves apart mainly by doing
abetterjobthantheirpeersof
makingloansratherthankeep-
ing costs down,” CPG contin-
ued.
“Noninterest expenses for
these200bestperformersac-
tually increased a median of
3.46 percent last year, or 55
basispointsmorethanforthe
largerpeergroup.
ToCPGSeniorAnalystKev-
in Halsey, those who landed
on the top performers list are
therebecauseoftheirabilityto
generatemoreloans.
“...Theybookedmoreloans
than their peers (net loans
grewamedianof7.8percent),
and did so at comparatively
higher interest rates,” Halsey
said.
The yield on average earn-
ing assets for the top 200 was
a median of 4.22 percent last
year,comparedwith4.10per-
cent for the peer group, the
analysis showed. As a result,
their median revenue growth
alsowashigherat3.58percent.
TheABAnotedthatwiththe
performance of small banks
improvingoverall,thecompe-
tition to earn a spot on the top
200continuestogrow.Itnoted
thattomakeits2014list,insti-
tutionshadtopostathree-year
averageROEof8.66,whilethis
year, the cutoff was higher at
8.76percent.
CB Financial was 166th on
theABATop200,withtotalas-
sets of $846.3 million, a three-
yearreturnonaverageequity
of9.21percentandnetinterest
margin of 3.47 percent. It had
net income of $4.29 million
andtotalnoninterestincomeof
$3.75million.
The most stars
Backing up CB Financial’s
strongperformanceisasepa-
rate,top-performanceranking
it received in April from Bau-
erFinancial Inc., the nation’s
leading independent bank
andcreditunionratingandre-
searchfirm.
According to BauerFinan-
cial, its 5-Star Superior Rat-
ingindicatesthatCommunity
Bank“isoneofthestrongestin
thenation,excellinginthear-
easofcapital,loanqualityand
profitability.”
BauerFinancial President
Karen Dorway noted in her
news release announcing the
rating that community-based
bankshavealwaysunderstood
theimportanceofrelationships
theyhavewiththeirlocalcus-
tomerbase.
“For the first time, we see
big banks acknowledging the
value in relationship bank-
ing,” Dorway said. “That’s
somethingcommunitybanks,
likeCommunityBank,haveal-
waysknown.
”Infact,becauseoftheirin-
herent focus on relationships,
communitybanksareuniquely
positionedtoservetheircom-
munities in a way no one else
can.Thoserelationshipspayoff
forbothCommunityBankand
thecustomersitserves.”
The importance of local re-
lationships aren’t lost on Mc-
Cune, who said Community
Bank has never lost sight of
itsmarket,whereitknowsthe
customers to whom it loans
money.
“All of the loans (we’ve
made) are to local business
people throughout the Pitts-
burgharea,”hesaid.
Moving up the ladder
Inpost-mergermode,CommunityBankearnsrecognitionfrombankingindustry
Pat McCune
REAR 810 BROAD ST.,WASHINGTON
724-222-6638
Hours: Mon. 10am - 8pm,
Tues.,Wed.,Thurs., Fri. 10am - 5pm
Sat.-Sun. Closed
BILL’S FURNITURE
Sofa $
29900
Loveseat $
27900
Recliner $
19900
q e r
AFRAID TO OPEN YOUR
401K STATEMENT
Who is working in 2025? Is it you or your
financial plan? How do you structure your
retirement income? What is the right day to start
planning for retirement - How about today?
Let me help. Call today for an appointment.
There is no cost or obligation!
3001 Waterdam Plaza Drive, Suite 180
McMurray, PA 15317
724-969-0277 1-866-575-2273
www.gkrikorian.com
Gary N. Krikorian, CPA, CFP
Financial Planner
Securities America Advisors, Inc.
Registered Representative
Securities America, Inc.
Member FINRA/SIPC
Securities America does not provide tax advice, these
services are provided by a third party advisor.
Covering the Pittsburgh &
Surrounding Areas
SECOND FLOOR ADDITION SPECIALIST
Before
40+Years Experience,
A+ Rating with Better Business Bureau
Call for FREE Estimate 724-941-4053
After
Fax# 724-941-0743
House too small?
Michael D. Buczkowski
Construction & Remodeling
✓Fully Insured
✓All Types of Major Home Improvements
✓Free Design with Each Contract