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 opportunities.

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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