Batter Up: EMV Puts Card-Not-Present Fraud on Deck

Posted by Jayme Moss on Apr 22, 2015 2:22:38 PM

EMV Chargeback liabilityIn the world of chargeback liability, who’s responsible for what? That’s what’s important for merchants to know. TODAY, if the card is present, the issuing bank for that card is generally responsible for any counterfeit losses. However, on October 1, 2015, that changes. Then, in card present transaction, the company responsible for the EMV information has to take on counterfeit losses.

What’s important for banks: If the bank issues a non-EMV card, the responsibility’s on them. But, if the card had an EMV chip and the provider did not process the transaction, then they may be responsible for counterfeit losses.

What’s important for merchants: Legally, the provider can pass responsibility for losses onto the merchant if their equipment isn’t capable of processing EMV transactions.


What about Card Not Present Transactions for E-Commerce Companies?

Just because the EMV chargeback liability shift pertains to card present transactions only, this does not mean the card-not-present (CNP) transactions are safe from fraud. CNP fraud cases currently account for 16% of all US card fraud today. In 2013, that accounted for $5.3 billion! And in 2017, US consumers are projected to spend $430 billion online.

If you have an e-commerce arm of your business, CNP fraud used to be a huge deal. Card issuers would simply charge back the losses to you. But today, those are all wiped out because of the 3D secure protocol programs they offer.

While the EMV chargeback liability shift only pertains to card present transactions, there is evidence that card-not-present fraud will rise once the EMV transition happens, as fraudsters find it harder to do their schemes with EMV and look to new avenues for their thievery.

Take for example what happened in Canada in 2008, when they rolled out chip-based cards nationwide. According to this data, Canada cut card fraud costs 55% from $195.1 million to $88.7 million in 2013. That sounds pretty good on the surface. But then domestic card-not-present fraud increased 133% from $102.1 million in 2008 to $238.4 million in 2013!  Just because you do not have to worry about the EMV chargeback liability shift for your CNP transactions, you must still remain diligent about credit card security.  If you have questions about your security, do not hesitate to contact us to discuss.

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Topics: EMV, Card Security