The National Retail Federation (NRF) says businesses are spending a huge fortune on terminals and software in order to comply with the government's initiative of using EMV-ready payment terminals in their stores. However, these expensive terminals are simply not enough to prevent data breaches since they only process cards that are partially protected.

In order to make the cards totally protected, the group believes that using a PIN along with the card owner's signature is a more effective, though more cumbersome way, to prevent fraud.

"The new EMV equipment does not stop breaches," said David French, senior vice president for government relations at NRF. "It is merely an additional expense small businesses are being told to bear."

Proponents of the chip-enabled cards argue that compared to cards with magnetic stripe, the former are more secure since they generate a unique code after being used in a transaction. This type of process makes it harder for hackers to counterfeit the cards.

However, the security issue is different in situations when the card gets stolen or lost. It appears like even chip-enabled cards are no match to "serious hackers" who can still use the card number in making online transactions. This is where the use of PIN comes in which, the group believes, will make it impossible for hackers to use the card if the code is unknown.

"It would be impossible for someone to use a stolen chip and PIN credit card without the correct code," said Bruce McClary of the National Foundation for Credit Counseling.

So far, only 27 percent of merchants in the U.S. had been able to meet the Oct. 1 deadline of making their payment terminals compliant to the new chip technology. The information was revealed following a survey that was conducted by the Strawhecker Group (TSG), a management consulting firm that caters to the payments industry.

Pushing small businesses to adopt the EMV technology could result to other payment alternatives to be locked out of the market, according to French. These include mobile wallets, near-field communication contactless payment and other technology that uses the smartphone.

"It would be inappropriate to prejudge their decision-making and stampede businesses into the adoption of solutions less protective for businesses and consumers than what has existed throughout the industrialized world for more than a generation," said French.