Are you, Mr. Merchant, panicked about the new EMV changes and consumer-fraud protection? Fret no more. Whether you are a frazzled business owner or just an inquisitive consumer, CreditCards.com has outlined exactly what the EMV fraud liability shift meant for all parties involved:
1. The liability shift changes who may shoulder fraud chargeback costs.
After Oct. 1, 2015, in-store counterfeit fraud liability shifted to the party — either the card issuing financial institution or the merchant — that has not yet adopted chip technology. So you really need to switch to this technology if you haven’t already done so.
Prior to this shift, credit card issuers were primarily responsible for covering fraud affecting consumer accounts, reimbursing cardholders for lost funds as a result of counterfeit (or other) fraud. As of Oct. 1, 2015, financial institutions will still cover cardholders’ accounts as before, but in some cases the institutions may be able to seek reimbursement from the merchant or merchant processor (like eMerchantBroker.com) if the retailer was not prepared to accept EMV payment technology.
2. The shift is intended to help parties deal with counterfeit fraud more equally.
The EMV fraud liability shift was implemented by major U.S. payment card networks (nine to be exact: Accel, American Express, China UnionPay, Discover, Mastercard, NYCE Payments Network, SHAZAM Network, STAR Network and Visa) to combat counterfeit fraud.
3. Stolen/lost card fraud liability may depend on the card and network.
If chip cards can be dipped and signed for, but not easily counterfeited, wouldn’t it be easy for fraudsters to just steal the chip cards themselves?
Potentially, but the liability shift details how stolen card fraud will be handled if criminals are willing to take such chances. For the most part, issuers will handle fraud resulting from a lost or stolen card situation just as they do now.
4. The liability shift does not apply to card-not-present fraud.
Merchants who make sales online instead of in-store don’t have to worry about today’s liability shift because it doesn’t affect them.
For starters, EMV chip technology does not work online, as card chips need to be physically read by a payment terminal during the card-dipping process to produce the unique transaction code. Chip card holders making online payments will continue to type in card numbers as usual and if card-not-present fraud occurs, it would be handled as it was prior to the October 2015 liability shift, typically by the card issuers based on their existing fraud liability guidelines.