October 1, 2015 marked an important date for merchants: the EMV card liability shift went into effect. EMV chip cards are the new credit cards with an embedded chip that many consumers are receiving. The chip in these cards affords a greater protection for merchants and their customers shopping at retail locations.
What, exactly, is the liability shift? The shift basically means that merchants – not banks – are responsible for fraud losses on certain transactions. The circumstances where the liability shifts to the merchant are pretty specific: the customer must have an EMV card, and fraud must occur on a non-EMV compliant payment terminal. In the past, banks held the responsibility for most fraudulent transactions, but now merchants that do not upgrade to EMV terminals will pay for this.
While EMV mostly impacts brick and mortar merchants, there actually is the potential for online retailers to see a spike in fraud. Why? Because criminals will find it increasingly difficult to use fraudulent credit cards at the point of sale, forcing them to look for easier targets: card not present retailers.
Traditional magnetic stripe cards were easy for criminals to duplicate; stolen credit card data could be easily imprinted on bogus cards, and these counterfeits could be used at just about any retailer. Chip cards, on the other hand, are not duplicable at this point. The EMV Migration Forum stated that chip cards are “virtually impossible” to duplicate, as data stored on chips embedded in cards is encrypted.
The good news for brick and mortar retailers is that the adoption of EMV terminals is rapidly growing. The Strawhecker Group, a payments industry consulting company, forecasts that by the end of 2015, 44 percent of U.S. merchants are expected to adopt EMV. The bad news, though, is that criminals are not likely to be deterred by the increased security of chip cards, and will be looking at online retailers so that they can continue their illegal activities.
All of this means that online merchants must be more diligent than ever and look for ways to keep fraud and chargebacks down. Pinpoint Intelligence is a fraud and risk management company focused on online merchants. The company offers friction-free fraud reduction through its Complete Pay fraud mitigation tool, allowing merchants to quickly and easily integrate an additional layer of fraud prevention into their transaction workflow.
Pinpoint Secure assesses risk on each transaction before it is processed, which means that potentially fraudulent transactions are caught before approval, reducing fraud losses and chargebacks. And reduced chargebacks mean less hassle for merchants and lower costs.
In a perfect world, fraud would have been eliminated a long time ago as new security measures were introduced (i.e., CVV on the back of cards). The reality, however, is that criminals look for the weakest link in a chain and try to exploit it. Using enhanced fraud mitigation tools is an unfortunate necessity, but it ultimately helps reduce merchant costs.