October 1, 2016, marked the one year anniversary of the EMV liability shift which brought about new, EMV chip cards for many businesses. This migration put chip-cards and chip-readers in the respective hands of consumers and business owners across the country, resulting in broad-spectrum feedback. Today, we take a look at one of the most transformative years in the credit card processing industry with some highlights of the first year of chip-card use.
3 ways that EMV chip cards continue to impact business
Higher than Expected Chargebacks
Since the introduction of EMV chip cards last year, retailers have reported an increase in the number of chargebacks they are receiving – much higher than anticipated after the liability shift. Merchants without EMV-enabled equipment are responsible for chargebacks any time a fraudulent transaction occurs. This only applies when a chip-card is presented at the point-of-sale. If EMV is as secure as everyone says, then why is fraud still occurring, and why is it occurring at a higher-than-anticipated rate?
Merchants who have not adapted to new ways in which they choose how to accept credit cards and have not updated their equipment need to know that they are targets of criminals and fraudsters looking to win big. The old magnetic strip terminals are able to detect that a merchant’s card should be dipped and not swiped; therefore, if a fraudulent transaction takes place and the POS system has not been upgraded on how to accept credit cards with EMV, the business will be held responsible for the chargebacks that will be soon to follow.
Debit Card Holdup
Debit card technology has lagged in EMV enablement due to card brand segregation and debit coding issues on the backend of EMV-capable terminals. This holdup was the result of the Durbin Amendment and the requirement that merchants be given the ability to choose between at least two unaffiliated networks for routing their debit transactions. This affects cash-back and debit-routing at the point-of-sale for debit card users.
Furthermore, independent PIN debit networks were disapproving of the language used to present routing options to consumers at the point-of-sale. Major card brands are working to streamline these processes so that merchants can test-drive their options before going all-in.
Slow Software Solutions
Sure, how to accept credit cards at your business’s point-of-sale have changed, but is your software up to speed? Recent data (and complaintive memes) suggest that 57-percent of all merchants have purchased and installed the EMV-capable equipment to take payments, but are still waiting to be certified so they can use their new chip reader. Over half of those waiting for software upgrades have been waiting since April to flip the switch.
In an interview with USA Today, Mallory Duncan, general counsel for the National Retail Federation cites that the EMV transition has been “a challenge for merchants and for customers,” saying further that the shift has been costly, “cumbersome, and worst of all it doesn’t protect customers to the extent that we wanted.” But, with any major technology change (looking at you, iPhone 7), the change in how to accept credit cards will take some getting used to.
The past year may have seemed long and arduous for those having to adapt to new ways of how to accept credit cards, but at Payline, we are certain that patience will pay off in the long run. This is the biggest disruption to the payments industry in nearly half a century, and it would be silly to think that an adjustment would happen overnight. Ultimately, these changes came about to protect the consumer and the merchant from fraud, and over time, it’s our perception that the EMV liability shift will only make the industry stronger for those who take payments.