Since the October 2015 liability shift, EMV remains frustrating for retailers and confusing for consumers—not a good proposition leading up to the next liability shift in October 2017
One year after the October 2015 liability shift took effect for retailers to accept Europay MasterCard Visa (EMV) chip cards inside the store, thousands of chip readers have yet to be activated. To make matters more frustrating, the next liability shift—for fuels dispensers—is one year away.
Convenience retailer investments in EMV are not preventing fraud because chip cards in the U.S. are not enabled for PIN authentication, which is the most effective way to combat fraud, ensuring the customer using the card is the owner of that card. In the United States, the convenience store industry processes 160 million transactions each day and invests billions to reduce fraud at the point of sale. For example, many retailers pay to use customers’ ZIP codes to verify a transaction to protect their customers and their business. Retailers have real incentives to eliminate payment card fraud because they, according to the Kansas City Federal Reserve, absorb 80% to 90% of all fraud losses on credit and debit card transactions.
Convenience retailers will spend more than $7 billion on EMV—or just under 70% of industry pre-tax income for 2015—to upgrade and replace software and equipment to accept chip cards, but the card companies prevent retailers from requiring the use of PINs to verify the cardholder and protect against fraud. Without the protection of a PIN number on transactions, consumers and retailers are vulnerable to fraud.
Leading up to the October 2015 deadline, the card networks were late providing the necessary software specifications to accept EMV transactions. Retailers then needed certification from each card network before they could activate EMV. There were bottlenecks for both, compounded by the fact that the card networks set a liability shift timeframe without regard to the ability of equipment manufacturers and software providers to actually meet the deadline—a problem that will undoubtedly turn out to be even worse at fuel dispensers.
Nearly a year ago, NACS Board member Jared Scheeler, managing director of The Hub Convenience Stores Inc., testified before Congress that his chain of four North Dakota convenience stores had spent roughly $134,500 to install POS and pump card readers that accept EMV chip transactions. At that time, NACS estimated that the average transition cost would be more than $26,000 per store, compared with an average profit of $47,000 per year.
Since the October 2015 EMV liability shift, many retailers have also been experiencing an outrageous increase in chargebacks, mostly erroneous. Counterfeit chargeback liability is unknown, and has not been divulged by Visa and MasterCard, despite industry efforts for clarification.
Last week the Merchant Advisory Group (MAG) sent a letter to Visa and MasterCard regarding ongoing challenges with the EMV transition for in-store deployments, and highlighted concerns regarding the feasibility of the payments industry being ready for the October 1, 2017, liability shift for fuel dispensers.
“Compounding the financial burden for small merchants is the liability shift already in place for in-store EMV transactions under which chargebacks have far exceeded expectations. And for larger retailers with many stores and multiple pumps at each location, the expense is staggering,” MAG wrote in the letter.
The NACS Show is just two weeks away, so if you want to learn everything you can about EMV, its hurdles and how to prepare for the next October 2017 liability shift, do not miss out on the education, guidance and discussions that will take place during the event.
Here’s how you can maximize your time at the NACS Show learning more about EMV:
- Participate in Technology Edge.
- Attend EMV-focused education sessions, such as “Are You Prepared for EMV?”
- Meet with vendors at the expo.
- Talk to members of Conexxus and industry experts at the Technology Edge Solutions Center.
- Talk to NACS government relations staff and general counsel in the NACSPAC Lounge.
On Capitol Hill, most of the efforts have so far focused on the aftermath of a data breach and notification requirements. NACS is urging policymakers to consider not only what happens after a data breach occurs, but also how to prevent breaches and fraud from happening in the first place. Protecting against fraud should be a top priority for all forms of payment, including mobile payments, and the best way to authenticate transactions is through a PIN or more advanced means.
NACS is advocating that retailers should have the option to require PIN on credit and debit card transactions and those that occur on a mobile device—the same protection banks require at ATMs.
PIN is the most secure authentication technology currently available and can be implemented now. All EMV chip-card readers are PIN-enabled with encryption security. When PIN is required, whether a card number or the card itself is stolen, a PIN protects consumers against fraud.