The Inconvenient Truth About EMV And What Your Small Business Ought To Know About This Liability Shift [part #5] - BNG Payments
The Inconvenient Truth About EMV And What Your Small Business Ought To Know About This Liability Shift [part #5]
Liability, terrifying merchants since it was first been mentioned in the EMV movement.
The biggest controversy regarding the change to EMV terminals is the switch of responsibilities onto the party who does not adopt EMV technology. Banks largely have adapted the new chip cards, but merchants seem to be dragging their feet, why? Is it because of the costs of upgrading? Probably.
The main driving force for merchants to switch to EMV is the change of liability onto merchants who do not comply; this has been pushed by processors, banks, and credit card companies.
“Visa’s global counterfeit liability shift will be instituted in the U.S for point-of-sale (POS) transactions. With this liability shift, the party that is the cause of a chip transaction not occurring (i.e., either the issuer or the merchant’s acquirer processor) will be held financially liable for any resulting card present counterfeit fraud losses. The shift helps to better protect all parties by encouraging chip transactions that use unique, dynamic authentication data” ( Visa pg. 3).
The liability shift will only affect transactions made with counterfeit cards
The liability shift will only affect transactions made with counterfeit cards, not including lost/stolen cards. Counterfeit cards are not the same thing as lost/stolen cards.
Lost/stolen cards are when the physical card is out of the cardholder’s possession. Counterfeit cards however, are a plastic card that contains a real cards information through card skimming. Since EMV liability only counts for counterfeit cards, lost/stolen cards are still unchanged and financial loss remains on the merchants shoulders.
Visa also states:
“Who holds the liability for a point-of-sale counterfeit chip-initiated transaction?” The Visa global POS counterfeit liability shift will occur on 1 October 2015 and the ATM and AFD liability shift will be instituted in the U.S. on 1 October 2017. The liability shift only is for counterfeit cards and does not pertain to lost and stolen cards. The party that is the cause of a chip transaction not being conducted (i.e., either the issuer or the merchant’s acquirer or acquirer processor) will be held financially liable for any resulting card-present counterfeit fraud losses (Visa pg. 8).
The sad truth is, the majority of card fraud is from cards that are lost/stolen rather than counterfeit card present transactions; therefore, merchants are not really gaining or losing anything substantial in protection from losses, or better security from EMV conversation.
So why the huge push for EMV?
Well, EMV readers are safer at not accepting counterfeit cards, but from our experience in the industry, more fraud occurs from lost/stolen cards rather than the counterfeit cards.
In fact, online fraud is far more prevalent and loses more money annually then card present transactions.
If you want to see the actual liability responsibility, along with a percentage of cases we compiled based off what we’ve seen through years of working with cards, you can read so here.
Okay so there isn’t any difference than the liability merchants had before EMV. The only real difference is that now the processor is liable in cases of the merchant having EMV but the processor not supporting EMV.
The sudden rush for processors pushing EMV make sense now?
Let’s face it, processors are making a lot of money pushing for terminals, since they’ve had to upgrade to make sure they’re not liable (since they haven’t been on the hook before).
This sounds rather anti EMV doesn’t it?
Well yes, but we kind of are. Bear with us for a moment.
As people who’ve been in the trenches for years and know how security changes; there are some benefits in EMV, a small benefit, but a benefit none the less.
However, it doesn’t solve the majority of fraud, rather smaller percent of it. Card present fraud is shrinking drastically not due to EMV, but because more fraud happens online because it’s far easier to commit then card swiped fraud.
So should you resist it?
Eh, no. There’s still enough a benefit to pursue upgrading to EMV in the future, although the U.S would have to change it completely to chip and pin to be as secure as Europe system
But the reality is you shouldn’t buy EMV because you’re pressured, or afraid of huge fraud losses.
Not much has changed for smaller merchants
The inconvenient truth is, not much will change for smaller merchants.
If a merchant wants to upgrade, it would be for the perceived benefit of safety from a cardholder perspective, rather than a real dramatic protection in fraud loss.
Now that we’ve covered all the implications of EMV, seems less terrifying doesn’t it?
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