Some smaller retailers report $10,000 to $15,000 increases in chargebacks per week, while larger retailers are experiencing $1 million in chargebacks per week
Since the October 2015 EMV liability shift, many retailers are experiencing an outrageous increase in chargebacks, mostly erroneous. Mike Lindberg, payment solutions manager at CHS Inc., commented at the 2016 Conexxus Annual Meeting in May that some smaller retailers have reported a $10,000 to $15,000 increase in chargebacks per week, while larger retailers are experiencing $1 million in chargebacks per week.
“I can’t imagine what will happen at the pump come October 2017,” said Lindberg, adding that the No. 1 chargeback reason code since October 2015 is “merchandise not received.” Some retailers are even seeing multiple chargebacks on the same credit card. Lindberg said CHS has ramped up its chargeback processes since so many are questionable, noting that retailers can also implement other processes, like transaction risk scoring and zip code entry, that allow them to combat this type of fraud.
Recognizing the growing problem with chargebacks, Visa Inc. also announced last week modifications to EMV certification and chargeback regulations. Visa is allowing all acquirers to self-certify their EMV solutions, which removes the need for acquirers to submit test results to the brands and provides acquirers with flexibility to modify their testing plans as needed.
Visa updated its chargeback policies:
- Minimum Chargeback Amount: Effective July 22, 2016, through April 2018, a $25 minimum limit will be required for allowable counterfeit chargebacks on U.S. domestic card present transactions.
- Maximum Chargebacks per Account: Effective with the October 2016 Visa Business Enhancements Release through April 2018, a maximum of 10 counterfeit fraud chargebacks will be allowed per account in a 120-day period for U.S. domestic card present transactions.
Visa estimates that these two changes will remove more than 40% of all U.S. counterfeit fraud chargeback transactions from the Visa network. And effective June 17, 2016, Visa will begin blocking counterfeit fraud chargebacks for Merchant Category Codes (MCCs) that are not eligible for the EMV liability shift, including automated fuel dispensers (AFDs) and ATMs.
Last week Visa also reported results of its Visa Transaction Advisor (VTA) service used by more than 35,000 gas stations in the United States. On average, VTA users have experienced a 54% decline in counterfeit fraud rates and a 51% decline in lost and stolen fraud chargeback rates.
As more retailers adopt EMV, fuel retailers are working to upgrade or replace their dispensers to accept EMV chip card technology by the October 2017 liability shift—an estimated $6 billion expense for the convenience and fuel retailing industry. Visa says that its VTA service can help merchants identify and block high-risk transactions before they are processed.
“For the many retailers unable to meet the aggressive EMV liability shift deadline, real-time risk scoring might buy some breathing room and protection from the onslaught of chargebacks after October 2017,” Gray Taylor, executive director of Conexxus, told NACS Daily.
Meanwhile, Bloomberg reports that cyber thieves are taking advantage of the situation. Counterfeit fraud is expected to increase 12.5% in 2016, according to Aite Group, as thieves seek to “use up” stolen card data before the next EMV liability shift.
“There’s a fire sale, to try to burn through all of the stock of card data that they’ve seen,” Julie Conroy, an analyst at Aite Group, told the news source.
Carman Wenkoff, chief information and digital officer at Subway, told Bloomberg that the company will complete its EMV rollout at its U.S. locations this month. Declining to disclose Subway’s chargeback costs, he noted that it’s been significant. “Every merchant should be thinking about how they should deploy EMV as soon as they can,” he said.