Back in 2016, Visa and American Express enacted policies designed to smooth the adoption of EMV technology by businesses.
The policy blocked all U.S. counterfeit fraud chargebacks under $25 and limited the number of counterfeit chargebacks to a total of 10 per card account.
In addition, the card issuer — not the merchant — would be responsible for any additional counterfeit fraud transactions that are disputed on a card account after 10 chargebacks.
Fast forward two years and these policies are about to change. In April 2018, merchants will lose these protections and become responsible for all counterfeit fraud associated with EMV card usage.
An analysis by American Express found that more than 40 percent of its counterfeit fraud chargebacks in the U.S. are for transactions under $25. This indicates that the loss of the liability protections could have significant effect on merchants.
The rules for liability generally state that if a fraudulent chip card is used at a business where the merchant continues to use a mag-stripe only terminal, then the merchant or card issuer would be liable for the fraud.
Merchants who upgrade to an EMV terminal can generally avoid liability because they have the already implemented the latest technology.
The EMV liability did not affect card-not-present transactions and lost or stolen fraud. In those cases, the liability remained subject to the existing rules.
Combat Card Fraud with EMV
Visa said previously that it recognized the fact that when the EMV transition first began to roll out in 2015, many merchants were still working to get their EMV chip card terminals enabled and certified. The chargeback policies were put in place to help relieve that situation where merchants might have been responsible for fraud while their EMV terminals were not running properly.
Similarly, American Express said they wanted to allow time for merchants to upgrade their point-of-sale terminals.
“Combating fraud is an ongoing priority for American Express,” said Mike Matan, Vice President, Global Network Business, American Express. “We recognize the migration to EMV in the U.S. is an effort that will take time, which is why we are making these policy changes in order to provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards.”
Now, that time is coming to an end and merchants are expected to have had enough time to roll out an EMV terminal.
Have questions about EMV? Contact us today to discuss your options.