When the EMV liability shift deadline came along this past October, a lot of retailers opted not to get on board right away. Many of these were smaller merchants, who could not, at that time, reconcile the cost of upgrading their point-of-sale systems with the day-to-day expenditures of running their businesses.
More than six months later, merchants that have still not implemented chip card readers at their locations have a big reason to reconsider, regardless of size. The reality of chargebacks — wherein a retailer is financially liable for counterfeit transactions — has come home to roost.
Over the weekend, The Wall Street Journal reported that, according to recent data from payments consulting firm The Strawhecker Group, the incidence of chargebacks at small and medium-sized retailers increased by 15 percent between Q4 2015 and the same quarter the year previous, and the rate is likely to continue to rise.
While smaller merchants may have felt, back in October, that EMV was designed primarily to protect larger retail chains, like Target and Home Depot — each of whom had fallen victim to headline-making breaches between 2013 and 2014 — some are learning now that chargeback fraud is not exclusive to major retail players.
A few weeks ago, WSJ notes, regional grocer Harps fell prey to a series of counterfeit charges at a number of locations that ended up costing the business more than $4,000 in total.
Mike Thurow, vice president of store systems for Harps, told the outlet that the 80-store chain has seen “a significant uptick” in counterfeit card costs recently; as a result, the company is making a concerted effort to implement EMV within the next few months.
"Unfortunately, there are so many that have yet to make the switch,” Stuart Tryon, special agent-in-charge of the criminal investigative division of the U.S. Secret Service, remarked to WSJ, “but we have told them and even preached that this is going to be the result when you don’t adopt EMV in time.”
But even merchants that were quicker than Harps, for example, in getting on the EMV train have nonetheless been hit by chargebacks because they simply weren’t quick enough. They’ve bought the upgraded terminals but are still waiting for outside vendors to upgrade related systems, and in the meantime, they remain on the hook for counterfeit transactions.
As Hannah Walker, senior director of technology and nutrition policy at the Food Marketing Institute, commented to Yahoo Finance: “Grocers invested, had the hardware installed, but their vendors, software providers, etc., could not, and many still cannot get them EMV-enabled.”
Yet another “midsized regional chain,” Walker shared with the outlet — despite having begun the process of converting to be able to accept EMV cards — recently lost $1 million in chargebacks in a single week.
For even smaller merchants, they do not need to get hit by multiple-instance, big-ticket fraudulent transactions to feel the sting of either having been a bit too slow in implementing EMV and/or not having taken into account potential hiccups that could prevent the secure transaction process from getting up and running in a timely fashion.
In the case of one Florida-based liquor store owner who shared his story with WSJ, all it took was getting ripped off to the (relatively minor, compared to some larger-scale breaches) tune of $800 to make him “irate” enough to challenge his vendor over that very chargeback, because he views himself as not at fault in the matter.
Regardless of their size or how soon they began the process of moving over to EMV acceptance (if they have begun it at all at this point), merchants throughout the U.S. are learning the hard way that there are no “takebacks,” as it were, regarding chargeback fraud.
For those who are lucky enough to have not yet paid the price (literally) for not upgrading to chip card-enabled POSs, there remains the dwindling opportunity to take the steps necessary to protect themselves against chargebacks before it’s too late … and before their luck runs out.
One could take the position that there’s no crying over spilled milk when it comes to EMV liability, and that’s a reasonable enough stance. But — given the recent statistics bearing out the reality that retailers that have not yet made the shift to EMV are increasingly at risk for chargebacks — more and more merchants might find themselves taking a different position when it happens to them.