Merchant chargeback fraud bill skyrockets due to EMV liability shift!

The liability Shift on credit card fraud is real and it’s hitting merchants where they feel it the most, in their wallets. Since the October 1st deadline there are some merchants that have experienced as much as a 20-fold increase in lost chargebacks because their equipment is not reading the EMV chip at their stores.

For a variety of reasons, many retailers have still not implemented EMV card readers, possibly due to the expense and need to upgrade their systems. Retailers who have yet to make these investments are now seeing the card-issuing banks push back all disputes to the merchants with no chance for victory. If there is any dispute on those sales, if the card was an EMV chip card and not properly read, the banks are using the liability shift to push that burden to the retailers. And for now at least, they are getting away with it.

If your stores are still unable to read EMV chip cards, and you are continuing to mag swipe these cards, you may have noticed a very disturbing trend as of October 1, 2015. That trend is one of automatically losing chargebacks on Visa and MasterCard transactions with no recourse.

On many routine chargebacks, where prior to October 1st they would have been 100% protected by Visa and MasterCard, retailers are now shocked to find that no matter how strong their defense, it is an automatic loss of the chargeback if the EMV chip was not read. The Visa and MasterCard card issuing banks are leveraging the EMV liability shift to reduce their fraud burden every opportunity they can and if it is an EMV card that is in question, the easy and legal decision is to push the loss back to the retailers when the chip was not read.

Retailers who were lagging in EMV readiness are now seeing the true cost of not upgrading their software and hardware for EMV, especially if they have a high average ticket where lost chargebacks are especially painful.

Retailers that do not have the ability to read EMV cards will be most vulnerable to all the stolen and fraudulent cards that are circulating in the market. They will be the soft target for fraudsters, along with e-commerce. If any of those stolen cards are swiped and used successfully at a retail location, there is almost a 100% probability that sale will result in a lost chargeback to the retailer. Those are odds no retailer can afford to take.

You need to make the investment to accept EMV Chip and Pin cards so you are no longer a sitting duck in chargebacks disputes. The card industry has merchants over a barrel at the moment and the only cure is to have the ability to read the EMV chip at the Point of Sale, or face the consequences.

If you would like more information on EMV readiness you can contact Michael Dattoma at Michael@retailmerchantservices.com.

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