The price associated with fraudulent credit card purchases was once left for the banks, but since last October, that burden has shifted onto retailers, unless they’ve upgraded their payment terminals to accept the latest EMV chip-based cards.
Small and midsized retailers have recently seen a 31% increase in the number of chargebacks since this liability shift has taken place. While this shift was initially announced back in 2011, and retailers had up until October 2015 to update their systems, only 1.4 million retail locations today accept chip cards. That’s only 10% of retailers out of 14 million total.
Admirably, large retailers such as Best Buy, CVS, Home Depot, Kroger, Target, and Walmart have completed the switch, but unfortunately, 40% of the top retailers have not, including corporations like Costco, McDonald’s and Safeway.
Consequently, merchants have seen a drastic increase in chargebacks and the banks are even been spotted charging merchants for types of fraud they’re not supposed to be held liable for.
While corporations like CVS and Home Depot have successfully upgraded all payment terminals to be EMV compliant, many brick and mortar stores that have not yet implemented have become the latest target for fraudsters.
In addition, card-not-present channels like e-Commerce sites have been a steady increase in fraudulent activity. E-commerce fraud rates have spiked by 11% since the October liability shift, leaving many to wonder if the worst is still yet to come.
So why have so little vendors successfully upgraded their payment terminals? According to the National Retail Federation and Forrester Research, more than half of surveyed large & medium size retailers claimed they’ve installed the new EMV equipment, but are waiting for certification from the credit card companies- and most retailers have been waiting for more than 6 months.
Fortunately, the three major credit card companies announced in June that they’ve streamlined certification processes to make it much easier for merchants to upgrade to EMV. American Express & Visa have also announced that they’ll be ending chargebacks for transactions under $25 and will be limiting chargebacks to no more than 10 per individual card account. This is great news for retailers considering 40% of chargebacks are under $25. MasterCard has announced a new, faster testing & certification program, but has not specified if chargebacks will be reduced.
Learn about PCI File Integrity Monitoring