Chargebacks Up 21% Post-EMV

New study quantifies fraud burden after liability-shift date

BOSTON — Retailers noticing an uptick in the amount of “chargebacks,” or money they are liable for because of bad credit-card purchases made with chip cards, are starting to see comparative numbers, with at least one research firm reporting a 21% increase in chargeback dollar volume after EMV.

In a study officially released this week, researchers with Boston-based Aite Group said 260.3 million chargebacks worth $5.8 million will hit merchants in 2016. The estimates amount to 17% more transactions and 21% more in dollar volume after Europay MasterCard Visa (EMV) liability-shift dates for in-store point-of-sale terminals.

As of last October, Foster City, Calif.-based Visa and Purchase, N.Y.-based MasterCard declared that any merchant who can’t process an EMV chip card will be liable for the cost of resulting fraudulent purchases.

“The increase we’ve seen year over year is partly attributable to how EMV issuers were prepared for EMV ahead of merchants,” said Julie Conroy, research director for Aite Group. She also said that prior to the liability shift, card issuers had to absorb billions in counterfeit fraud. Since the liability shift, those same issuers can charge such fraud back to the merchants. How much this development has contributed to the increase in chargebacks to merchants, Conroy could not say.

Another finding from the Aite study was an increase in e-commerce fraud, which is rising compared to what she called “card-present” purchases. Detractors to the mandated data-security measure have always said EMV does little to stem online fraud. Conroy of Aite told CSP Daily News that, historically, the liability for fraudulent online sales always fell on the merchant, but that some issuers are working with merchants on collaborative remedies.

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