No run for the roses—not the Kentucky Derby—but rather for US EMV conversion. US merchants are stumbling out of the gate in their attempts to be EMV compliant given that they now wear the chargeback collar. As the following article describes, merchants are feeling more pain than gain as they work through a multi-phase process leading to accepting chip cards for POS transactions.
For millions of merchants that haven’t yet met the credit-card industry’s deadline for accepting more secure plastic, the bill is coming due.
As of last October, retailers who didn’t make the transition to chip cards are on the hook for counterfeit transactions that used to be covered by card-issuing banks. The costs of the fraud, known in the industry as chargebacks, are starting to stack up.
A few weeks ago, a woman used a counterfeit card to buy $400 worth of gift cards at a Harps grocery store—and then hit nine more stores in quick succession after the first attempt worked, sticking the regional grocer with a tab for $4,000 that previously would have been absorbed by the card-issuing bank.
The credit-card industry and retailers battled for a decade over rolling out chip cards, which are more secure but also require new payment terminals and take more time at checkout. The balance tipped against retailers after a spate of cyberattacks hit major chains such as Target Corp. and Home Depot Inc. and compromised millions of cards.
Target, Home Depot and some other large merchants, including Wal-Mart Stores Inc., are now processing chip transactions, but there are still plenty that haven’t installed the new equipment and are for the first time facing sizable costs for counterfeit transactions.
Mercator projects by the end of 2016, 84% of credit cards and 48% of debit cards with chips, will have been issued to consumers. But only less than half of POS terminals will be enabled to process EMV transactions. The reality is that the US transition to EMV is a marathon, not a sprint. Many payments industry providers admit this process has not started smoothly, and they are aware that merchant relationships are very fragile right now. In March, some Florida retailers sued credit card issuers, which may impact the liability transfer. One certainty—keep the Advil handy.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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