With all the news that has come out surrounding the U.S.’s adoption of EMV technology, it seems that everything’s coming up roses. The cards are more secure and are sure to reduce in-store fraud, and the rest of the world has already adopted it and shown it to be successful.
But what are the downsides?
It’s certainly true that in-store fraud is sure to decline with the adoption of EMV technology; after all, Brazil saw an 80% reduction of in-store credit card fraud after adopting EMV. However, the flip side to that equation is rarely discussed. E-commerce has seen tremendous growth in recent years, with 79% of all online purchases being made by credit card…and 1.08% of all online transactions resulting in chargebacks (and growing at a rate close to 20% per year).
So while live purchases are certainly going to be safer, experts are anticipating a meteoric rise in online fraud.
And what about the liability shift?
Until now, card issuers have been liable for fraudulent charges on credit cards. Users were not held accountable, and merchants still got paid for purchases; all of the risk was placed upon the major banks and card issuers to protect their cards and police their usage. But with the EMV liability shift, the merchants are now going to be held responsible for fraud perpetrated against them, and the users.
Yes, the merchants.
Once the EMV shift occurs, banks and card issuers will not be liable for fraudulent charges made with an EMV card when used with non-EMV equipment, meaning that merchants will have to either assume the risks and liability themselves, or they will have to purchase and upgrade their equipment.
In theory the cost of new equipment, services, training, and downtime during the changeover will be offset by the reduction in fraud, but these costs can be quite high for small merchants who now have to ask themselves “Do I spend a lot of money now, on new equipment? Or do I run the risk of spending a lot of money later, on chargebacks?”
Whatever choices are made, it’s important to know that while the EMV shift will bring an overall positive change in the payments industry, there are downsides that are sure to cause delays. We urge you to be ready for them.