The 2015 liability shift transferred the financial responsibility for chargebacks resulting from incorrectly processed EMV transactions away from the card brands and onto businesses. Although this shift occurred a few years ago, many businesses still use non-certified EMV terminals or rely on outdated swipers due to cost constraints, antiquated providers and lack of pressure to adopt new technology.
The problem is, relying on old technology only works until it doesn’t. In the case of one photography business, swiping a chip card resulted in a chargeback of $5,368.75. With high-ticket-value services and products, the cost of going one more day without proper EMV technology isn’t worth the risk. You may be wondering, though, why did the photography studio get hit with a chargeback?
EMV cards are designed to combat fraud. They’ve been wildly successful around the world in doing so, but the U.S. was a late adopter due to the age and scope of the infrastructure that had to be updated.
Just as the card brands — Visa, MasterCard, Discover and Amex — are deflecting the costs for fraudulent, improperly processed EMV transactions, issuing banks are doing their part to encourage adoption. They’re hitting businesses at random with “bank-initiated chargebacks.” These chargebacks have nothing to do with the customer and can occur even in the absence of fraud. They’re intended to incentivize businesses to upgrade their equipment.
Only an EMV-certified credit card terminal can authenticate the one-time code EMV chip cards produce to authorize a payment. If these cards are swiped, they lose their fraud-prevention benefits and are no safer than traditional magstripe cards.
Sadly, for businesses, it can be easy to be duped into a terminal that’s advertised as EMV-ready when it isn’t.
Have you seen all those terminals, in your personal life, that require you to swipe your chip card even though a slot to dip the card is present? While these terminals have the components to be EMV-ready, they aren’t certified. The technology doesn’t work, meaning you have to fall back on deprecated technology for these transactions. This doesn’t just put you at risk of a bank-initiated chargeback, but also makes your business and customers more susceptible to fraud.
The photography company in question received this chargeback under the label “EMV Liability Shift Counterfeit Fraud.” Maybe your business has also received a chargeback for this reason, and you didn’t know what to make of it. In this case, the chargeback notice continued to state “If your terminal is not chip-enabled, we have no further recourse.” As already stated, this type of chargeback has nothing to do with the customer, so proving that you did your due diligence and obtained a signature won’t protect you in this case.
The formal chargeback notice can be viewed here.
Rather than waiting for the axe to fall, you’re recommended to discuss options with your provider to upgrade to an EMV-certified credit card terminal. Level 3 certification is the highest level and means that the terminal has undergone three levels of testing:
By being choosy and selecting a level-3 certified terminal, you can better ensure that your EMV terminal isn’t just EMV-ready, but also certified.
If your current provider does not have the ability to provide this level of proof, consider partnering with other Merchant Service Providers. You may fear the cost of breaking your contract, but if your business processes high-value transactions, the cost of a bank-initiated chargeback could be larger than the fee in your exit clause. Be smart and look out for your business’s health while protecting your valued customers: Get an EMV upgrade.
Have further questions about EMV or chargebacks? We’d love to hear from you! Note them in the comments section below.