Credit Card Fraud Liability Could Soon Shift to Merchants

Date: September 15, 2014

New chip technology is designed to fight fraud

In the coming
months, most new credit and debit cards will come embedded with a microchip
that helps prevent counterfeit fraud. Next year, some fraud liability will
shift from issuers to merchants who haven’t upgraded their terminals. We ask
Visa consumer products executive Kim Lawrence what the change means for you.

Why are EMV chip
cards the best option for businesses today?

Businesses that
upgrade their terminals are investing in security. Effective Oct. 1, 2015, any
business that is chip-enabled is protected from counterfeit fraud transactions
affiliated with the major payment brands. If they choose not to invest in chip
technology, the business will be financially responsible for counterfeit fraud
conducted in their stores.

How do these cards
change what occurs during a sales transaction?

Chip technology
generates a unique code with every transaction. This code makes it much more
difficult for a criminal to use account information if stolen. All a business
needs is a terminal that can communicate with the new chip cards.

Many countries
have already transitioned to EMV cards. How has that impacted rates of credit
card fraud in those places?

Countries that
have transitioned to EMV chip cards, including those in Europe, Asia, Latin
America and the Middle East, saw a dramatic decrease in counterfeit fraud.

Could you offer a
couple of examples on each end of the spectrum that illustrate what businesses
have to do to support chip processing?

U.S. merchants are
not required to adopt chip technology, but we think it’s a smart choice to
protect their businesses from counterfeit
fraud. Many businesses may already have a terminal with a slot for chip card
acceptance, but it may not be activated. In that scenario, the merchant will
need a minor software download from its processor. Other businesses may need
new terminals. Chip enablement could range in cost from nothing for software
activation to a few hundred dollars for a new terminal.

What will factor
into the cost of transitioning for a small business? 

The most important
factors will be the hardware and/or software to enable chip acceptance,
followed by the potential cost of counterfeit fraud if businesses don’t
upgrade. Business owners should contact their acquiring financial institution
or processor to learn more about chip technology.

A Javelin Strategy
and Research study predicted that small retailers will not exceed 25 percent
readiness for EMV by the 2015 milestone. Why?

This was an early
forecast, but in other countries small businesses lagged larger retailers
during the migration process. Reasons vary depending on the country, but Visa
is committed to ensuring small business owners understand that updating their
payment technology is an investment in more secure transactions and business-building

If money is an
issue, do you have any advice for how long to hold off on making the switch? 

An easy first step
is to contact their payment card processor to understand the exact cost of
upgrading and their estimated counterfeit fraud exposure. Merchants who are
ready to upgrade to EMV but can’t afford to buy a terminal outright should
consider shopping around for the best deal or leasing the equipment.


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