Chargebacks: The Lesser Talked About EMV Risk For SMBs

By Jeremiah Shea, contributing writer

We are now almost six months removed from the EMV Liability Shift of October 2015. While Tier 1 merchants have migrated in large numbers, the vast majority of everyone else is lagging far behind — to the tune of about 17 percent adoption.

There are multiple reasons for this, including lack of education, the poor timing of the October deadline being between the back-to-school and holiday shopping seasons, and processor and software providers not having their solutions ready. Even today, there’s some reluctance among business owners to justify the added expense, seeing little benefit of adopting.

From a risk perspective, the long-time thought and discussion point has always been the liability of assuming the cost if any fraudulent transactions happened inside of your establishment. For many SMBs, the “it won’t happen to me” idea is what has dragged out the adoption, and almost rightfully so. Would a criminal truly spend the time taking a fraudulent card into a small retail store? Difficult to say, but certainly the larger stores have a more lucrative appeal.

Another thought, within the food service industry specifically, is why would someone try to use a fraudulent card for a meal? It’s a logical question and one that has caused the food service industry to procrastinate their adoption plans.

Another angle though is that most aren’t thinking of is chargebacks. We can consider an example that speaks to a small restaurant which addresses the two ideas above — not only is this hypothetical business small, but they are also a restaurant. What if a malicious customer came into said restaurant that doesn’t support EMV with a fraudulent (or non-fraudulent) EMV card and ordered a ton of food and drinks. The bill comes and the malicious person pays via black stripe and leaves.

Days or weeks later the restaurant gets a notice from their processor that the person is disputing the charge and the restaurant now faces a hefty chargeback. In this case, the restaurant doesn’t have a leg to stand on. Whether the malicious person used their real card or had a fraudulent one, the restaurant couldn’t take the payment via EMV and therefore is forced to pay up.

This is actually based on a true story and something to consider for those businesses in the SMB and food service spaces. The logic of pushing off adoption can certainly have repercussions regardless of your size or what goods you sell. And while there are certainly entities fighting back against the change to EMV, it seems fairly inevitable at this point. Why wait?

For solution providers, this is a powerful message to take to market. If you can understand the benefits associated with the migration and couple it with all of the risks that are out there, you will have a bulletproof strategy and campaign for all business that accept a card-present transaction.