New EMV Rules Leading to Spike in Chargebacks

The fight to end fraud has unearthed a familiar enemy. Since the implementation of EMV chip card technology, there has been a spike in card-present chargebacks. Merchant-service providers are noticing this troubling trend across the country. Chargebacks for card-present transactions have jumped by 50% since the Oct. 1 EMV liability shift. The exact reason for the increase is unknown, but some professionals think issuers are using the EMV reason code during chargeback processing. However, when a reason code is used there is generally a surge in consumer retrieval requests. But that has not been the case.

Some issuers suspect that consumers are using the EMV liability shift to commit “friendly fraud” against merchants that don’t have EMV chip enabled terminals. New laws push liability for fraud onto merchants that don’t have EMV chip terminals. As a result, some consumers are filing chargebacks once they’ve made purchases at these establishments to get money back for legitimate purchases. Most chargebacks have been for minor transactions at food delivery places and discount stores.

Card issuers fear that an increase in chargebacks will negatively impact merchants that are not used to dealing with chargebacks and the costly fees associated. If this continues, small merchants may decide to stop taking credit cards all together. Unfortunately, banks have not been sympathetic to merchants that have been crippled by chargebacks, as officials reiterate that merchants have had ample time to make terminals EMV compatible.

For merchants that are not ready to adopt EMV technology, card issuers suggest that they pay attention to the last four digits of card numbers, ensuring that they correlate with the numbers that show up on the receipts for suspicious transactions. If these numbers don’t correlate, employees must ask customers for another form of payment.

High chargeback rates are hurting small businesses. Now more than ever, merchants need chargeback protection. Can your business afford a spike in chargebacks? Take a proactive approach to chargeback prevention. EMB provides high quality merchant systems to prevent chargebacks. We offer Chargeback Shield, powered by Verifi and CDRN a program that practically eliminates the frequency of chargebacks by 15-30%. Chargeback Shield is a specialty chargeback suite that will monitor, track, and alert you whenever a customer files a dispute with their bank. Start reducing your chargebacks today with EMB!

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