Coming up on the 1st anniversary of the EMV Liability shift many merchants are still left confused, frustrated, and watching margins shrink. Some merchants are reporting astronomical increases in chargebacks due to counterfeit card usage while other have seen little in the way of liability. Most of us understand why the EMV transition is necessary – some merchants just don’t want to take the steps and cost necessary to upgrade their point of sale to be EMV compliant. Other merchants have been pro active and purchased, upgraded, and installed EMV capable terminals only to find out that the card brands have not yet “verified” them so the new equipment is essentially useless until that process is complete! Although the magnetic strip is notoriously insecure the road to complete EMV adoption has certainly not been a smooth one!
One thing that is often confused when it comes to EMV Chip Cards and Fraud Security
EMV chip cards in no way protect consumer information in eCommerce or Card Not Present situations. As EMV gains traction in the retail environment card not present environments are seeing increased fraud pressure (as predicted). A May report from Aite Group estimates that online and other card-not-present fraud will cost U.S. retailers and financial institutions $7.2 billion by the end of 2020. That represents a 215% increase in Card Not Present Fraud!
While retail stores struggle to upgrade and convenience stores and gas stations face a looming EMV deadline the dark web is bustling with criminals looking to cash in while fraudulent card data is still relatively easy to capitalize on. In estimates reported by CNBC fraud losses will hit $14 billion between this year and the year 2020!!! Once EMV is prevalent in the retail environment the pressure will be on the eCommerce merchants and consumers to develope and embrace new technology like 3-D secure to make stolen card information difficult to profit from.
The EMV Payment Standard Has Not Been All Doom and Gloom!
The signs are clear that consumers are safer at retail checkouts. MasterCard recently reported that counterfeit card fraud is down at its top 5 largest EMV enabled merchants by more than 60 percent since October of 2015. Although only 30 percent of MasterCard’s merchants are enabled to accept EMV transactions this statistic is an indication of the effectiveness of EMV payments at fighting credit card fraud. Additionally MasterCard now has over 1.7 million chip capable businesses which accounts for around 30 percent of the business locations in the US and over 80% of its cardholders now tote chip enabled cards while Visa reports over 300 Million chip card carrying customers.
Why has the transition to EMV Payments been so difficult?
Julie Conroy, research director with the Aite Group attributes the rocky and costly road for a more secure payment system to the fact that “The United States is the largest and most fragmented card market to go to EMV”. The market in the United States is definitely one of the most complex payment markets in the world. We have tens of thousands of banks, between national, state, and credit union, as well as millions of merchant level payment stations and thousands of point of sale software system providers. Compared to other countries that have implemented the EMV payment standard the U.S. is largest hurdle of them all. Although it has not been what many would consider a smooth adoption, it has been relatively rapid, for instance, in Canada who began their staged EMV migration a deccade ago there are still merchants who are making the switch.
Are POS Providers Taking Advantage of the EMV transition?
While the average small retailer can get away with a $250 investment in a compliant EMV capable terminal many merchants are complaining of costs exceeding $30,000! This is due to the software and hardware upgrades that their POS providers are requiring. In many cases the cost to upgrade is actually costing more than their point of sale did when purchased new! So the question is are Point of Sale software providers taking advantage of the EMV liability shift? After all they did have a couple years notice of the requirements and many are still struggling to become compliant! Not being a technical guru and to not place judgement we will leave that up to you.
Why Chip and Signature When Even the FBI Supports Chip and PIN?
The rest of the world made the choice to transition to the most secure form of EMV transactions which involves using the chip card and personal PIN while the U.S. decided to go with the less secure Chip and Signature so as to minimize the cost to the banking system. Large merchants like WalMart and Home Depot are upset, filing formal complaints and suits, because they understand that not enough care was taken to protect businesses and consumers with the current EMV migration. For EMV to truly protect them and their customers it needs to utilize Chip and PIN not just a signature. Bankcard Brokers has long been a supporter of chip and PIN versus chip and signature transactions for the heightened security and ease of transaction. As it turns out even the FBI agrees that Chip and PIN should have been the standard. In a statement by the FBI “When using the EMV card at a point-of-sale terminal, consumers should use the PIN instead of a signature,” the FBI said. “This fully utilizes the security features built within the EMV card.” We think that the NRF (National Retail Association) Senior Vice President and General Counsel Mallory Duncan said it best by summarizing the FBI’s recommendation “What the FBI is saying is what the rest of the world already sees as common sense … it’s the right thing to do, and we hope the banks are listening.”
Is Your Business Being Affected by the EMV Liability Shift?
Before October 2015, the banks were responsible for the fraud cost if a credit card was counterfeit. Under the card industry’s new rules, if a chip card used in a non-chip reader turns out to be counterfeit, the merchant now gets stuck with the fraud cost and with no opportunity to fight the chargeback. That applies even if the card reader is a chip reader that has yet to be certified.
After outraged merchants were hit with the reality of how many counterfeit cards their businesses saw on a monthly basis and the fees started stacking up the card brands did modify their policies. Visa states that it would no longer issue chargebacks on transactions below $25 and would hold merchants responsible for no more than 10 fraudulent incidents per customer account. MasterCard, also has stated that they would take steps to reduce chargebacks but are yet to provide details. However, if your business has yet to upgrade its POS to the new EMV payment standard it is time to do it. As more and more businesses become EMV capable criminals are on the hunt for businesses not up to snuff resulting in businesses who never before saw chargebacks to start feeling the pinch. Merchants have reported up to a 10 fold increase in their monthly chargebacks hurting profit margins and creating turmoil. Becoming EMV compliant and shifting the liability of these fees back to the bank is often times a simple matter and the cost can be negligible or in many cases even FREE.
Want to upgrade your POS to be EMV Compliant? Why not do it for Free!
If your business is ready to upgrade but does not want to endure the cost Bankcard Brokers proudly offers the most competitive FREE EMV/NFC Terminal program on the market. We guarantee that not only will you appreciate more competitive credit card processing rates but our world class service provided by a team of ETA – Certified Payment Professionals. Want to sign up for a free terminal and great fixed rates? Simply click the orange button below and complete our simple and secure 7 minute application!