The introduction of chip technology in credit cards in the United States was designed to increase information security and reduce credit card fraud. The US EMV (Europay, Mastercard, Visa) liability shift in 2015 was meant to encourage merchants to adopt the technology quickly and it means that merchants or credit card issuers who haven’t adopted chip technology can face liability for consumer fraud. It’s been two years since the shift and whether the introduction of chip technology has improved security has been a hotly debated topic in credit card processing.
Chip Technology Has Reduced Counterfeit Fraud
According to Visa, counterfeit fraud at chip-enabled credit card machines dropped 66% from June 2015 to June 2017. By the end of 2017, 55% of storefronts in the U.S. were accepting chip cards with more than 462 million chip-enabled cards issued to consumers.
CNP Fraud on the Rise
While physical POS fraud has dropped dramatically since the liability shift, card-not-present fraud has been on the rise. 2016 saw a 40% year-over-year increase in CNP fraud, which involves transactions in which the physical card is not presented such as online sales. One study estimated that the liability shift and rise of e-commerce will increase CNP fraud from $3.1 billion in 2015 to $6.4 billion in 2018. As credit card information becomes harder to steal through POS transactions, identity thieves look for easier targets such as the online sales market.
The United States was one of the last countries to shift to chip technology and data from other countries showed a similar increase in CNP fraud.
Benefits of Accepting Chip Cards
As a retailer, there are many good reasons to make the switch and begin accepting chip-enabled cards:
- Builds customer trust. Consumers have become concerned with the growing number of data breaches at retailers, but more than 60% believe that chip technology improves security.
- Improves customer experience. Chip payments are easy, secure, and result in a better customer experience at the POS.
- Reduces fraud. A chip card generates a unique code with every transaction so data can’t be used to create counterfeit cards for in-store use.
- Reduces your fraud chargeback risk. Retailers are more likely to be responsible for lost/stolen and fraudulent transactions in-store without chip technology compliance.
- Accept contactless and mobile payments. By upgrading your POS system or switching service providers, you can begin accepting mobile and contactless payment methods like Apple Pay.
What Merchants Should Know
While it isn’t perfect, chip technology has been doing its job to reduce fraud at the physical POS. As chip acceptance grows among retailers, counterfeit card use is expected to continue its decline.
As a retailer, it’s essential that you are able to accept chip technology. If you cannot support EMV transactions, you are liable for fraudulent transactions. It isn’t enough to have a credit card machine that supports chip technology; you also need payment processing services through a merchant services provider that supports chip technology. Making the switch to chip technology doesn’t just improve customer service; it also reduces your liability in case of fraud.
