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Merchants Hit With EMV Chargebacks

Merchants Hit With EMV Chargebacks

In an interview with Information Security Media Group, Liz Garner, vice president of the Merchant Advisory Group, reported that chargeback costs have dramatically increased following the EMV liability shift in 2015.

Some small and mid-size merchants are paying up to fifteen thousand dollars per week in chargeback costs, and some larger merchants are paying as much as one million dollars per week. “And those charges are largely unfair, [Garner] argues, because many merchants were not EMV-compliant by the liability shift date due to circumstances out of their control.”

Many merchants upgraded their payment terminals in advance of the liability shift date, but are unable to start processing EMV payments as they wait in line for EMV certification. In the meantime, they are being hit with chargeback fees.

Garner contends that merchants should have been given more than four years to make the switch. “Merchants aren’t [EMV compliant] for lack of trying, but because of some of the challenges that the financial services industry faced in its ability to get some of these point-of-sale terminals certified – that’s one of the pitfalls of inadequate timelines,” said Garner.

And though some analysts look to our northern neighbor’s EMV transition to draw comparisons, it’s worth noting that Canada’s payment ecosystem differs significantly from the payment ecosystem in the States; Canada has approximately 400 banks and credit unions – the U.S. has over 15,000. Additionally, the transition to EMV in Canada took about a decade, notes CO-OP Financial Services. “The move to EMV in Canada began in 2005 with the payment brands committing to EMV chip and PIN. All players – issuers and acquirers – began their preparations between 2006 and 2009 with aggressive rollouts between 2010 and 2012. And the last of the POS devices were [made] EMV compliant by the end of 2015 or removed from service. It has been a 10-year journey.”

Another reason for the increase in chargebacks, Garner claims, is the decision by card brands and issuing banks to distribute EMV chip and signature cards – not the more secure chip and PIN version. Equipping cards with chip and PIN technology would greatly reduce fraud because criminals are not likely to know the PIN numbers associated with lost or stolen cards – signatures are much easier to fake.

If you’re a merchant without an EMV-certified solution, our MiPoint semi-integrated solution can help. Call 800.396.0246 to ask about our current solutions or custom integrations.

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