EMV Chargebacks. Ouch

23 May

He strolls into your club and sits at a VIP table. Your server asks for his ID to sit among the plutocrats. He orders bottle after bottle of your top shelf liquor. At the end of the night your server hands him his tab. He wasn’t dressed particularly well, so she’s worried he will start a fight over the bill.

Without hesitation he flops his card on the table. Your server swipes his card and hands him the receipt. He snakes the pen across the bottom of the page, gives the server a wink, and walks out.

A week later you learn that his $8,000 bill is being refuted. “It was fraud,” Visa explains. But you have his signature, a copy of his license and video of him imbibing heavily on camera. Unfortunately your only recourse is to take it to small claims court. Such is the nature of the EMV chargeback.

Starting October of last year all merchants who processed credit cards without using the inconvenient chip method were liable for 100% of any fraud. Previously fraud was swallowed by the banks and credit card networks. No longer.

Assuming the merchant had the discretionary funds to invest in new hardware that accepted EMV payments, this is an easy fix, right? Wrong. Even if merchants had complaint hardware, their point of sale software might not be approved.

When PCI (payment card industry) pushed through the rules in October, they didn’t expect so many POS companies to be so far behind. To be EMV certified, the POS providers had to go through certification via third party. Well there are a limited number of certifiers and a large number of parties needing certification. A giant backlog accumulated.

Studies estimate that 50% of merchants will have EMV enabled at the end of 2016. Until then a large number of chargebacks will accumulate on hapless merchants.