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How to Deal With Increased EMV Card Chargebacks

EMV Card Chargebacks

Many merchants have been dealing with an unexpected increase in EMV card chargebacks. Most merchants knew of the approaching shift in liability leading up to October 2015. Since then, financial responsibility has moved from issuing banks to the shoulders of merchants. Those merchants must adopt specific technology or risk being held responsible for fraudulent charges. Much of which the banks were absorbing before. Even well prepared merchants have seen an unexpected rise in chargebacks. Over the last 6 months, some payment networks report as much as a 50% increase in chargebacks. Most of which, related to card-present transactions.

Reasons for the Increase

There are many factors leading to the increase. But most relate to EMV card chargebacks and how the EMV transaction process works. The card companies claim that this is all normal for an introduction of a new technology. They blame misunderstanding and confusion. Their recommendation is to adopt the chip readers and avoid the liability. But yet, just having an EMV ready terminal is not quite enough. Merchants must have an understanding of exactly how to protect themselves. They must develop procedures to minimize the chances of fraudulent transactions.

How to Combat EMV Card Chargebacks

Capital Bankcard believes knowledge is power when it comes to combating fraud. We make every effort to ensure our clients have an understanding of HOW to use new technology.

Liability in the Swipe:

First things first. You should absolutely be using EMV ready terminals for all your transactions. Even unchipped cards can be dangerous in a terminal that cannot process EMV chips. There is no way for the older terminals to know whether the card has a chip or not. So, depending on the processor, every card may processes as if it did contain a chip. This leaves merchants liable for every transaction. The merchant’s responsibility begins as soon as a chip card begins processing. This makes it very important that proper procedures are followed. Nothing will 100% protect you from fraud, but the following are general guidelines:

1. Always use chip cards as instructed by the terminal. Insert and follow the screen prompt.
2. Always require a signature and verify.
3. Never swipe a chip card or manually enter the numbers. This does not take advantage of the EMV chip.
4. Stop if an EMV card does not process or gets declined. Do not try swiping. Ask for another form of payment.
5. Non-EMV cards can be swiped. You may be held responsible though if you key numbers manually.

Intelligent criminals will rarely attempt fraudulent activity if they believe the transaction will fail. It is in their best interest to avoid suspicion. The chances of being a target in the first place will go down if a merchant follows a strict procedure. And if they do not budge or go outside of the guidelines for processing EMV cards.

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Don Bregin

Don is an industry professional with 30+ years of experience in finance and accounting, risk management, general business management, credit card processing and electronic payments.

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