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Chargeback Insurance, Safeguarding your Business for EMV Liability Shift

In August of 2011, Visa made the announcement that it was moving toward EMV contact and contactless chip technology in the U.S. The first milestone, effective on October 1, 2012, involved Visa expanding its Technology Innovation Program (TIP) to merchants in the U.S. The deadline for the EMV liability shift was set for the beginning of October 2015. These deadlines have obviously come and gone with the end of 2015 fast approaching. The biggest concern now is for the merchants, and whether or not they fully understand what this liability shift means for them.

Fraud has always been a problem for merchants, but the amount of fraud is about to change. According to Javelin Strategy & Research, a Pleasanton, Calif.-based payments-research firm, there is about $6 billion is lost, stolen or counterfeit card fraud at stake. Before the EMV liability shift, issuers absorbed these losses. Now, the liability has been shifted over to acquirers in cases where fraud occurs due to merchants being unprepared for EMV.

According to Stephanie Ericksen, head of Authentication Product Integration of Visa USA, “The merchants that have not yet deployed contact chip technology at the point of sale may take on some additional liability for counterfeit transactions if chip could have prevented that counterfeit.”

In truth, a shocking 44% of small-business owners are completely unaware of the liability shift. A lack of clarity is to blame for merchants not fully preparing themselves. When merchants receive their November and December processing statements, they will feel the reality of the chargeback liability. The focus of conversation is quickly going to move from potential fraud liability to the reality of actual chargebacks and the reasons for them.

Acquirers, on the other hand, have made the EMV rollout a top priority. Many acquirers, afraid of falling on the wrong side of the shift, have begun to churn out chip cards. In other parts of the world where EMV is already adopted, acquirers generally equipped merchants faster. So far, the U.S. has had a different experience in that issuers are pumping out cards faster than merchants are equipped or even aware of the liability shift.

According to the vice president of ISO channel management at Clearent LLC, a Clayton, MO.-based merchant processor, the fraud is more than likely to move online where “nobody knows who you are”. Merchants are going to experience a significant, shocking increase in chargebacks.

One source merchants can utilize in order to protect themselves from the potential increase in fraud – especially online – is credit card chargeback insurance providers. Credit card chargeback insurance from EMB can not only protect your business, but your customer’s personal information as well. Chargeback insurance can help you distinguish between authentic charges and charges that are indeed fraudulent. In the end, a low chargeback rate means you can maintain your low prices. Don’t wait for those processing statements to arrive to properly educate yourself and equip your business.