It was never going to be easy to introduce the EMV ecosystem in the USA. Not only did they have to re-issue all the cards, but they also had to convert all the merchant terminals. From 1st October 2015 in the USA: for merchants the liability for chargeback transactions generally will shift to the acquirer/merchant in certain cases if they do not use EMV chip-enabled devices and applications to process payment transactions. The liability for the chargeback costs to the merchant or acquirer depends on whether:

• EMV chip cards (domestic and international – including credit and debit cards) are used
• EMV chip-enabled point-of-sale (POS) card payment acceptance devices/applications are deployed (excluding automated teller machines (ATMs) and automated fuel dispensers (AFDs)), including in-person POS retail devices, unattended terminals, kiosks and vending machines, and mobile payment acceptance devices (MPOS).

Merchant acquirer’s experience

In January 2016, Visa reported only 750,000 merchant locations were EMV enabled which could result in the US acquirers being broadly exposed, at least in theory, to chargebacks triggered by counterfeit fraud and in some cases, lost and stolen fraud. In practice:

• several acquirers have reported increased chargeback levels
• many other acquirers have seen little or no impact from the liability shift
• the acquirers who have experienced elevated chargebacks, however, have not incurred higher loss levels as of yet as they report that “as merchants have been have been able to fund the chargebacks.”

Retailer’ problems in having EMV terminals certified

The retailers experience has been much more varied, some are quite happy with the new EMV scheme and the change of liability for chargebacks.

But other retailers have had bad experiences. Indeed, the increased chargeback charges drove B&R Supermarket Inc. and Grove Liquors LLC, two Florida retailers, to file a lawsuit in March against seven card networks, including Visa, MasterCard and American Express; 10 banks, including JPMorgan Chase, Capital One and Wells Fargo; and EMVCo. According to AFP, “The merchants claim that despite converting to EMV prior to the liability shift and training their employees in the technology, they have been unable to get their EMV terminals certified by the card brands. As a result, they incurred 88 chargebacks totaling more than $10,000 in fraud-related expenses between Oct. 1 and Feb. 15. Over the same period a year earlier, these retailers reportedly only had four chargebacks.”

The suit claims that merchants as a whole have incurred “billions of dollars” in chargebacks and fees since the liability shift took place.

AFP continued, “The retailers allege that the card brands and the banks conspired to shift billions of fraud charges to merchants by enforcing a liability shift date that was unrealistic for merchants to meet. According to the plaintiffs, a key reason why meeting the liability shift date has been so difficult for merchants is because the process of certifying their EMV terminals is not within their control.”

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CTMfile take: The EMV ecosystem definitely works, and the levels of chargebacks have come down wherever the sysems has been fully implemented. Have your EMV terminals in the USA been EMV certified? If not, it could cost you.