The fraud liability shift could impact your business


As a business owner, what would you do to keep your company technologically current?

As a customer, what would you do to make sure you’re making the most secure purchases possible?

Meow-meow, a biohacker from Australia, decided there are no limits to convenience and safety. The strangest thing about him is not his name, but rather the near-field communication chip he’s implanted in his left hand. Although he discourages anyone from trying the implantation at home, he celebrates a “frictionless interaction with technology,” according to ABC News.

Although your business doesn’t have to get this serious about keeping up with the times, EMV technology, which calls for chipped payment cards, is something all businesses should be on board with.

What is the fraud liability shift?

Prior to October 2015, card brands were liable when a fraudster used a counterfeit card at a retail location. This means that it would be up to Visa, MasterCard, American Express, etc. to refund the cost of the purchase to the rightful cardholder. Liability has since shifted to merchants if they haven’t upgraded terminals and devices to accept chip cards.

What could this mean for business owners? No chance of winning a chargeback dispute and possibly thousands of dollars lost. The government wants to push business owners to have safer payment technology, and for good reason.

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The responsible parties

The liability shift was the result of collaboration among nine card networks (Accel, American Express, China UnionPay, Discover, MasterCard, NYCE Payments Network, SHAZAM Network, STAR Network and Visa), says The networks knew they needed an incentivized rule — not necessarily a requirement — so compliance is a choice. However, the production of magnetic swipe cards will eventually cease, so resisting the switch is pointless.

Chip cards include EMV technology, named for the responsible brands — Europay, MasterCard, Visa. The chip in an EMV card creates a one-time transaction code. Unlike chip cards, swipe cards’ data never changes and once someone has access to it, they always will. This is why you’re sent a new magnetic swipe card when suspected fraud occurs on your account. EMV brings us one step closer to a fraud-free world, but they only help for in-person transactions. In fact, the push for safer retail payments has been so successful that fraudsters are concentrating their efforts on eCommerce and phone orders. Also, EMV cards are harder to counterfeit than stripe cards.

If you’re worried about safer payments, you’re like many merchants out there. Switching to EMV is in your best interest because it protects you in a fraud dispute. Without it, you’re automatically to blame and it proves to banks (and your customers) that you’re not keeping up with the times.

The costs?

How much will doing nothing cost you? How much will switching cost you? This partly depends on your business type. Some companies or nonprofits enjoy a 0 percent fraud rate. Other businesses have a higher chance of attracting fraud, and therefore will be hurt the most by not making the switch. Jewelry and electronics, for example, are stolen through fraudulent card purchases, then sold for cash. Gas stations have an extended deadline before liability falls on them. Also, consider your average ticket size. Would one fraudulent purchase usually cost you $1,000 or $10? Even if you’re on the lower end, the bare costs of any chargeback dispute can get expensive. Chargebacks911 found that $1.40 is lost on chargeback fees for every $1 of fraud.

As the consumer

Usually, cardholders blindly trust businesses with cardholder data and are less concerned about payment security because they are protected from fraudulent transactions. However, it does have an impact on consumer peace of mind.  Would you want to shop at a store that was not processing your credit cards in a secure manner? How long will you patronize businesses that are behind the times? It says a lot about a business if they’re not taking your payments seriously.

Hailey Tresch is a content writer for PayFrog, a payment processing brokerage based in Colorado Springs. More can be found at