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Merchants slow to migrate to EMV, see rising fraud costs

Maria Korolov | July 8, 2016
The deadline for switching to chip-based card readers was last October, but most merchants still have not upgraded and are now liable for point-of-sale payment card fraud

In a recent survey of large and midsize retailers by the National Retail Federation and Forrester Research, more than half said that they have installed the new EMV equipment but are still waiting for certification -- and most have been waiting for more than six months.

VeriFone, the largest supplier of payment terminals for U.S. merchants, reported integration and certification complexity and testing delays for upgraded terminals.

"U.S. merchants in particular are suffering from EMV delays and chargeback fees," said VeriFone CEO Paul Galant on last month's earnings call. "Given the apparent escalated level of fraudulent activity and the growing chargeback fee pressure faced by merchants, the entire U.S. payment industry is working hard to fix this bottleneck and to simplify and expedite the EMV certification processes going forward."

But the card companies are stepping up.

In June, the three major credit card companies announced that they have streamlined certification processes to make it easier for merchants to upgrade to EMV.

In addition, both Visa and American Express announced that they will end chargebacks for transactions under $25, and will limit chargebacks to no more than 10 per each individual card account. According to Visa, 40 percent of all chargebacks are under $25.

Mastercard announced a faster new testing and certification program, but did not specify whether chargebacks would be reduced. The growth in chargebacks levels is "consistent with other markets," the company said, referring to countries that have already concluded their migration to chip cards.

"While this is not a cure, the new policies and procedures will hopefully expedite EMV terminal conversion in the coming months," said PJ Rohall, fraud strategy supervisor at Radial. "Not surprising, these policy changes come on the heels of Visa and Mastercard being sued by large retailers like Wal-Mart and Home Depot."


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