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EMV liability shifts: A backward stampede by the networks? [Corrected]

As retailers file suit and legislators fire off letters of inquiry, the card brands seem to be mitigating the harsher aspects of their liability shifts. Could this change the game plan for deployers migrating their ATMs to EMV?

July 5, 2016

Editor's note: This article has been edited to correct inaccuracies in regard to the MasterCard EMV liability shift. ATM Markeplace regrets any confusion this might have caused.

by Daryl Cornell, CEO, Triton

Listen closely.

That sound you hear — you know, the one that sounds like a herd of stampeding cattle? That's the sound of not only VISA, but now also American Express furiously backtracking on EMV chargebacks in the face of strong legal, market, and quite likely, behind-the-scenes political pressure.

Rewind the tape to last October, when the card brands began charging back fraudulent transactions to non-EMV merchants. Caught in the crosshairs were the merchants who had spent capital to upgrade their hardware for EMV

It turned out that upgrading didn't matter much, as those EMV early-mover merchants began getting hammered with fraud chargebacks because their hardware wasn't certified or their processors weren't EMV ready.

Right on cue, the lawsuits started rolling, the public relations battle fired up and Congress started sniffing around. Guess what happened next?

Lo and behold, the networks announced "adjustments" to their EMV chargeback rules. In the case of Visa and AmEx, this means:

• no chargebacks under $25 on counterfeit cards; and
• no more than 10 chargebacks over $25 on a counterfeit card.

MasterCard adamantly states that it is not changing its chargeback policies, but has said that it is "adding more intelligence on its network to minimize chargeback costs to merchants who have not yet transitioned to EMV."

The company also has introduced streamlined certification procedures to make compliance faster and easier. Certification backlogs have turned into a source of lawsuits brought by merchants who had EMV equipment in place before the liability shift but couldn't get through the card brands' lengthy certification processes before Oct. 1, when the chargebacks started rolling in.  

Additionally, MasterCard has tightened up its chargeback process to address another sore spot with merchants — invalid chargebacks. "The MasterCard network now has checks and blocks to ensure that chargebacks follow the liability shift guidelines," the release said.

In all, the liability changes and reassurances look like little more than a hasty retreat by the card brands in the face of public pressure.

Perversely, it's also a reward for those merchants who decided not to upgrade to EMV.

What about ATMs? Just a little less than three months from now, MasterCard will an implement liability shift for ATM transactions. VISA is scheduled to follow one year later.

But while ATM hardware certification is largely finished, processors are still not all ready to handle EMV transactions at the ATM.

ISO EMV readiness right now is a work in progress and merchant-owned retail ATMs are still largely magnetic stripe.

So should ISOs and merchants rush to upgrade their ATMs to EMV prior to the Oct. 1 deadline?

Or, as with point of sale, will the card brands cap the number and dollar amount of chargebacks to non-EMV ATMs — or implement new safeguards — vindicating the "wait-and-see" approach of some deployers?

EMV may be coming to the U.S. but it would appear that the liability shift monster has been defanged and declawed.

photo istock

This article was republished, with permission, from the Triton blog, atmAToM.

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