Six months after the credit card fraud liability shift, over three quarters of merchants are still not able to process payments made by chip cards in the US. Despite the new protection being available, the recent report from consulting firm Boston Retail Partners states that only 22 percent of merchants are actually processing payments using the chip.

The introduction of EMV chip cards heralded a global standard for credit and debit payment cards. EMV chip cards contain embedded microprocessors that provide strong transaction security features and other application capabilities not possible with traditional magnetic stripe cards.

The shift in liability is costing the merchants dearly, as banks are no longer liable for chargeback if the EMV chip card technology has not been used in the transaction.

Data from the Strawhecker Group, an electronic payment advisory company, indicates that the number of fraudulent charges increased 15 percent in the last three months of 2015, compared to the year before.  Instances of chargebacks are unlikely to go down any time soon.

The reasons for those 78% of merchants not being able to process EMV cards vary:

  • Seasonal worries
  • Worry about disruption during the holiday shopping season
  • New payment terminals not working correctly – Max Milam, owner of Milam’s Market Grocery stores has issued a lawsuit for losses
  • Not being able to have their payment systems certified
  • The cost of new systems

But whatever the reason merchants have not taken action, it is proving a real burden for smaller stores.

The story of Harps Food Stores is making the rounds in the Fintech and retail media, not to mention notable national titles such as The Wall Street Journal, which has covered the issue. Let’s also not forget social media.  The 80 store chain got stuck with a $4,000 tab in a single day when a fraudster hit nine of its stores.  It could not do anything, the liability was with it and not the bank.

Stores can shift liability to the banks by installing EMV chip card terminals, but those that are rushing to halt the avalanche of chargebacks might be in for another shock.  A backlog of installations, a raft of technical certifications from networks and processors and certification queues all make it a slower process than many merchants anticipated.  Many merchants are going to have to fight chargebacks in other ways until they make the shift.

The experience of the UK might give many in the US market some reassurance and vision of how chip and pin has worked in the long-term.

The UK introduced chip and pin 10 years ago. It had many of the same problems at introduction such as smaller merchants’ reluctance to be able to process EMV cards owing to the cost of a completely new PoS system.  Despite initial issues, EMV is a well-established payment process.  It is trusted by banks, merchants and cardholders.  The problems EMV had when it was launched are a distant memory, it is likely the same will happen in the US given a little time.