The EMV Liability Shift
As EMV has been adopted in other regions of the world, the criminals have set their sights on countries with a less secure mag-stripe infrastructure, making the U.S. one big target. Truth is, merchants and banks lose billions to counterfeit card fraud every year.
Liability Shift Explained: To stem the tide of fraud and propel the rollout of EMV cards and devices, the card brands have introduced “carrots and sticks” for both card issuers and merchants. One of the most compelling incentives took place in October 2015. Known as the “Liability Shift,” it occurs when a fraudster presents a counterfeit card (and in some cases a lost or stolen card) at the point of sale. The entity—card issuer or merchant—using the least secure technology will be responsible for the cost of the fraudulent transaction.
Counterfeit Fraud Chargebacks
Mag-stripe: With mag-stripe cards, the financial responsibility to cover counterfeit transactions typically falls to the bank/issuer. Merchants likely aren’t aware that fraud has occurred since consumers who spot a questionable transaction usually contact the card issuer directly.
EMV: With EMV, a merchant that can only process mag-stripe cards may be held liable for the costs of any fraud resulting from certain counterfeit cards. If an EMV card is compromised and the information on the mag-stripe is used to make a counterfeit card that is presented in person for a purchase, and the merchant doesn’t have EMV-enabled technology in place to process the transaction, the merchant may incur the cost for the full transaction amount and any related chargeback fees. In some cases (depending on the card brand), if a lost or stolen EMV card is used to make a purchase on a device that can only read mag-stripe cards, the merchant may be held liable for the purchase amount and any related chargeback fees.
For detailed information concerning each card brand’s definitions of the liability shift, visit the EMV Migration Forum site by clicking here. You can also see an infographic depicting the liability shift by clicking here.
Avoiding the Shift: It is estimated that by the end of 2015, 70% of credit and debit cards in consumer wallets will contain EMV chips. Businesses that have an EMV device in place will be protected from most in-person fraud charges that stem from the use of counterfeit cards. Don’t get caught off guard. Be prepared for EMV so you can protect your customers’ data, your reputation, and your bottom line.
Watch Shift into Gear: Protection From The Liability Shift