EMV or “chip” cards have become the US industry standard for credit and debit transactions made in-person at a business. There are now more than 1 billion EMV cards in circulation in the US, and in 2020, 73% of card-present transactions involved an EMV card being read by an EMV-capable terminal, up from just over half two years earlier. As a result, in-person fraud rates for counterfeit cards have plunged. According to a May 2019 report from Visa, merchants that accepted EMV chip-enabled cards saw a 76% drop in card-present fraudulent fraud.
Beware of EMV Non-Compliance Fees
Unfortunately, some unethical providers view EMV as another opportunity to invent extra fees, like they did with PCI Non-compliance Fees, and bury them in statements using confusing descriptions.The names they use vary— EMV non-compliance fee, non-EMV compliance fee, EMV non-enabled fee, EMV non-acceptance fee for starters—so be on the lookout for any line-item detail that contains “EMV.” Let’s take a closer look at the types of fees you could come across, and how you can avoid them.
Old Equipment Fees
While it’s in everyone’s best interest to reduce fraud by ensuring that transactions are made with EMV cards on an EMV-enabled terminal, the card brands have not mandated that merchants upgrade to EMV devices. Merchants that use mag-stripe only terminals risk an increase in chargebacks that result from the EMV liability shift.
Beware: Some providers charge punitive fees to merchants that do not yet have equipment and software to process EMV transactions.
EMV Fallback Fees
Nobody wants to abandon a transaction if a credit card fails to read. Therefore, when making the rules for EMV, the card brands put a safety measure in place to ensure a good customer experience. If a payment terminal fails to obtain the card details from an EMV chip, the user will be prompted to swipe the card using the terminal’s magnetic-stripe reader. This is called an “EMV fallback transaction” and the reasons run from the innocuous, like a damaged chip or dirty card, to a system issue, like a broken chip reader or untrained staff, to the dangerous, like fraud.
To protect against fraud, it’s important that EMV terminals are properly reading EMV cards. Earlier this year, Visa introduced a new fee to entice merchants to address system problems that result in a high percent of chip read failures. If more than 10% of a merchant’s monthly transactions result in a fallback, Visa will assess a “Non-EMV Fallback fee.” If an EMV card is swiped instead of using the EMV chip, a fallback fee of $0.10 will be applied to that transaction.
Beware: Some providers are assessing this Non-EMV Fallback fee for all card brands, not just Visa (though the other brands may institute a similar fee in the future). And some are tacking on an additional $25 monthly fee for any merchant that exceeds the 10% threshold. To make matters worse, the analysis may only be done once or twice a year, so merchants may continue to be billed this fee for several months after they have fixed the problem!
Non-EMV Transaction Fees
The card brands do not charge higher interchange rates to process transactions made with the swipe of a mag-stripe card. They realize that the merchant is not in control of the consumer’s decision to pay with a mag-stripe only card, or to replace a card that has a faulty chip. Well, guess what? The unethical providers are at it again!
Beware: Some providers are charging a premium transaction rate—we’ve seen as high as 0.65%—on any credit card swiped transaction.
How to Avoid EMV Non-Compliance Fees
Good news: Most of these fees aren’t mandatory. There are right-minded providers out there that will educate you instead of penalize you. Listen to the advice of professionals, and always do your research to ensure that you are working with an ethical provider that offers transparent pricing and doesn’t charge unreasonable “made-up” fees.
Lastly, if you haven’t yet upgraded to an EMV terminal, do so today. The costs of chargebacks resulting from the liability shift can really add up, so it’s important to upgrade to a more secure solution like the ZeroTouch Terminal that accepts payments via a card insert or the safe tap of a contactless card or digital wallet. Your business may even qualify for a free EMV-enabled terminal to make compliance more attainable; so you can work with a provider that won’t charge you any fees and get an EMV-capable device right away (win-win!).
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Editor's Note: This post was originally published in January 2017 and has been updated for comprehensiveness and accuracy.