Starting July 22, credit unions and other card issuers may find themselves picking up some of the tab for merchants that still haven’t migrated to EMV.
On that day, Visa will begin blocking all U.S. counterfeit fraud chargebacks of less than $25. American Express has said it will follow suit with a similar policy by the end of August.
“These smaller chargebacks generate a great deal of work and expense for merchants and acquirers, with limited financial impact for issuing banks,” Visa said in a statement. A chargeback is a card issuer demand for a retailer to cover a loss from a fraudulent or disputed transaction.
Also, in October Visa will begin limiting card issuers to just 10 chargebacks per account for fraudulent counterfeit transactions. After 10 chargebacks, card issuers will be on the hook for any fraudulent counterfeit transactions on the account. American Express said it will implement similar rules by the end of the year.
“This reinforces the responsibility issuers already have to detect and act on counterfeit fraud quickly,” Visa explained. The blocks will stay in effect until April 2018 for both Visa and American Express.
Visa said implementing the $25 threshold and the 10-chargeback limit should cut down on the number of counterfeit chargebacks merchants see by 40% and the dollar amount of counterfeit chargebacks to merchants by 15%.
American Express said that more than 40% of its counterfeit fraud chargebacks in the U.S. are for transactions under $25.
Most retailers still have not switched to EMV, though many plan to do it soon, according to a survey performed in May and June by the National Retail Federation. The NRF found that 48% of retailers have implemented EMV technology or expected to do so by the end of June. A full 86% said they plan to have EMV available by the end of 2016.
“Of those who had not implemented, 57% said they had already installed the card readers and other equipment but were still waiting for certification by the card industry so they could turn it on. And 60% of those said they had been waiting for six months or longer,” the NRF reported.
The delay appears to be catching up to merchants that missed the liability shift deadline, which was Oct. 1, 2015. According to a survey of more than 3.5 million card-accepting merchants by management consulting firm The Strawhecker Group, the number of chargebacks among small and medium-size businesses rose by 31% year-over-year in the fourth quarter of 2015; dollar volumes rose 15%.
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