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Visa moves to streamline chip-card processing certifications

Matt Hamblen | June 17, 2016
After retailer complaints and lawsuits, Visa confronts 'nasty situation'

Visa's moves should help in making progress toward the newer terminals, McKee said. But "Visa's announcement begs the question, why wasn't this done from the start?"

MasterCard and other card companies did not immediately respond to a request for comment on Visa's moves. McKee said he expects other players in the payment ecosystem will begin to "extend olive branches to merchants."

Visa included in its remedies on Thursday a change to its chargeback policies. Visa said it would block counterfeit fraud chargebacks under $25, since these smaller chargebacks "generate a great deal of work and expense for merchants."

In addition, banks will be limited to charging back 10 fraudulent transactions per customer account and will assume liability for fraudulent transactions thereafter. These changes take effect July 22 and will remain in effect until April 2018.

Duncan said the new limits on chargebacks will be small, however. "The new limits are so high as to have a marginal effect," he said. "If you say not more than 10 chargebacks can occur from one customer account, that is still a huge hit on a merchant."

In the past, even two chargebacks per account would have been the normal, accepted limit, but if a single chargeback averages $100, that could reach $1,000 per customer, Duncan noted.

Some retailers seemed surprised by Visa's announcement, and it wasn't clear what precipitated it since retailers have been complaining of certification delays since at least last September.

McKee said that recent chip card lawsuits filed by Walmart and Home Depot may have played a role in Visa's timing and "have shown the industry that retailers are not taking this chip-card transition lightly." While the lawsuits are not directly related to certification delays, they have bearing, McKee said.

Walmart sued Visa in New York State Supreme Court on May 10 for not requiring shoppers to type in a PIN when using a chip-ready debit card. 

In a separate lawsuit filed June 13 in U.S. District Court in Atlanta, Home Depot also raised the PIN issue against both Visa and MasterCard.

As recently as April, the EMV Migration Forum, which represents 170 banks, merchants and card companies, said the chip-card conversion process was causing consumer confusion and delays at checkouts.

Randy Vanderhoof, director of the forum, said Visa was "showing some flexibility" in addressing delays im merchant chip-card migrations. "This will provide some welcome relief to merchants struggling with the costs of migration in terms of both equipment and certification as well as dealing with chargebacks."

In a statement on Thursday, Visa called the U.S. migration to chip technology " a significant undertaking" but said 300 million chip cards are in the market with 1.2 million merchant locations accepting the cards. An average of 23,000 new merchant locations are chip-ready each week, Visa said.

There are about 12 million payment terminals in the U.S., and the EMV Migration Forum recently said up to 7 million have chip-enabled terminals in place, with only 1.2 million of those terminals certified for accepting chip cards.


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