EMV 2018 – Three Years Later

It’s been almost two years since the EMV liability shift and with over 75% of all US cardholders now having received their new chip cards, their use is growing rapidly in the US. Although it’s still a slower process for consumers because of the time it takes for the Chip card transaction processing verses swiping the mag stripe, there’s still benefits. The chip cards protect customers from POS fraud when the merchant they are buying from has EMV enabled. Each time the card is used at the POS, the chip card creates a unique transaction code that cannot be used again. For the fraudster, replicating the card may seem impossible.  If a fraudster is able to steal a code from the chip transaction, they would not be able to use it again for another POS transaction. When using a card with a mag stripe and not the chip, a fraudster can replicate the information on the mag stripe and use that card easily, again and again. It is important to note that a chip card will only protect consumers from POS fraud, and not e-Commerce fraud (but this is coming very soon).

EMV in the U.S. Today

The distribution of chip cards continues to grow. Since one year ago more than 326 million visa chip cards have been issued and according to CreditCards.com, a recent poll found that at least 70% of credit cardholders have at least one chip card in their wallet.  According to Strawhecker, they estimate that US retailers will reach 90% EMV readiness in 2017. Others predict that chip cards will achieve a complete rollout near the end of 2018 for the US.  Other countries, who are EMV enabled, have reported that POS fraud rates are stabilizing. 

Although Retailers still face EMV issues, card companies hold off on chargebacks, which is a good thing for Retailers. According to Kisha Wilson, marketing manager at Slabbkiosks, Visa and American Express announced policies last year to limit chargebacks for fraudulent credit card purchases under $25 – through April 2018. An analysis by American Express found that more than 40 percent of its counterfeit fraud chargebacks in the U.S. were for transactions under $25! Over a year ago, American Express announced that merchants will not be held liable for chargebacks regarding counterfeit fraud for transactions under $25. In addition, American Express planned to limit the number of counterfeit fraud chargebacks to a total of 10 per card account. The card issuer – not the merchant – will bear the financial liability for any additional counterfeit fraud transaction that is disputed on a card after 10 chargebacks. This limit does not prevent a card member from disputing additional fraudulent transactions.

Visa said it would block all counterfeit-card chargebacks under $25 in July of 2016, and by October 2017 would allow banks to charge back only 10 counterfeit transactions per account, and will require them to assume liability for all transactions thereafter.

The changes announced by both Visa and American Express will remain in effect until April 2018. According to Visa, this will reduce the number charge backs that merchants are seeing, significantly. Merchants can expect to see 40 percent fewer counterfeit chargebacks, due to these changes and a 15 percent reduction in U.S. counterfeit fraud dollars being charged back.

MasterCard, continues to update its fraud rules to minimize the cost to retailers that have not yet transitioned to EMV. The policies were designed to limit merchant exposure to excessive charge backs on fraudulent accounts. Now MasterCard’s chargeback policies have changed. To ensure that charge backs follow the liability shift guidelines, they have implemented checks and blocks. There are policies in place limiting merchant exposure to excessive charge backs on fraudulent accounts. According to MasterCard,1.4 million US retailers are now chip-active—impressive!

Today, fraud still remains a major problem for retailers. Two years after the liability shift, the cost to invest in a more secure future remains uncertain for many retailers. Predicting the future can cost you, however, preparing for it can save you-- a fortune!  Transitioning to EMV is indeed something that Retailers must prioritize for 2018.  The charge back grace period is quickly approaching this April.  Upgrading the technology that will give customers a greater sense of security and avoiding liability cost, should be top of mind for Retailers. Fraud prevention should always favor the honest consumer and protect the conscientious retailer.  As specialist in EMV upgrades and integrations, we assist retailers through this arduous process.

 

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