NEW YORK – Beginning with the October 2015 EMV liability shift, retailers that have not upgraded their payment terminals to accept EMV chip-card transactions are “on the hook” for counterfeit transactions, writes the Wall Street Journal, and this particular cost of fraud—chargebacks—is adding up.
The news source reports that chargebacks among small and medium-size merchants increased 15% in Q4 of 2015 from a year earlier, according to a Strawhecker Group survey, adding that the volume of chargebacks has likely increased even more since then. Although the group didn’t put a dollar figure on the chargebacks, other experts put the total around the tens-of-millions of dollars mark.
Since the October 2015 EMV liability shift, many retailers are experiencing an outrageous increase in chargebacks that are mostly erroneous. Mike Lindberg, payment solutions manager at CHS Inc., commented during the Conexxus Annual Conference last week 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,” Lindberg warned. The No. 1 chargeback reason code since October 2015 is “merchandise not received,” he said, which in theory makes no sense for the big box retailers. Some retailers are even seeing multiple chargebacks on the same credit card, and indicating that there is very little interest from card issuers or acquirers to help solve this costly problem.
Due diligence, however, can pay off. Convenience retailers experiencing a higher volume of chargebacks can successfully reverse the charges on challenge because convenience retailers aren’t within the October 2015 liability shift specification for type and applicability (i.e., the fuel dispenser).
“The banks will hopefully learn from the first October 2015 liability shift what is chargeable, because right now it’s a ‘charge it all back and see what gets challenged’ approach,” said Gray Taylor, executive director of Conexxus. He previously told NACS Daily that this approach to chargebacks “will have dire consequences for small to mid-size retailers, who can scarcely afford dedicated chargeback staff.”