In the payment security space, the news is almost impossible to ignore. EMV chip-enabled cards are coming, along with an incredibly important fraud liability shift. As of October, whichever party (issuers or merchants) is not EMV compliant will take responsibility for fraud and all related chargebacks.
In a post covering the Fraud Summit here in Chicago in May, we discussed the growing concern over whether or not merchants will be able to meet the rapidly approaching deadline. The concern though, isn’t with the big box merchants, many of whom are already compliant - it’s with the smaller merchants who don’t have the technical support and cash that the larger companies have to implement overhauls of this size and scope.
Unfortunately, a recent survey by Wells Fargo confirms the suspicions that these smaller merchants won’t be ready. In fact, 68% of the small business owners surveyed in early July weren’t even aware that the EMV shift was happening.
Of the merchants who do accept point-of-sale card transactions, only 31% were confident their current POS systems accepted chip-enabled cards. Nearly the same amount (27%) weren’t sure, or refused to answer.
Looking ahead, only 29% committed to updating their POS systems to accept chip-enabled cards by the October 1st deadline. Another 34% committed to updating them after the deadline, but 21% refuse to update theirs at all.
What’s more concerning though, is the reasons many of the small business owners cited for not wanting to upgrade - the most popular at 48% being that they don’t believe it will impact their businesses.
|
Reason |
Percentage |
|
Will no longer accept point of sale credit cards for payments when the liability shift takes place. |
25 |
|
Do not want to pay for the EMV terminal. |
46 |
|
Not concerned about the liability shift in the case of fraud. |
41 |
|
Do not think the shift is fair for businesses. |
36 |
|
It will not impact my business. |
48 |
David Pollino from Bank of the West, cited this exact retort during the Fraud Summit, noting that many businesses aren’t motivated to upgrade because they believe they are “low fraud merchants.” They’re traditionally measuring this based on current chargebacks, which, according to Pollino, is an inaccurate and unreliable method.
Many small business owners didn’t have a good idea of how much this conversion would cost them, but were split right down the middle when asked how much improved protection from fraud (if any) the EMV shift would provide them and their businesses.
While many merchants, including trade associations like the Merchant Advisory Group have spoken out about the limited benefits they stand to gain in this switch, compared to the issuers, everyone agrees that it is a necessary step in the right direction. To learn more about EMV conversions in other regions and how we predict it will affect the U.S., download our whitepaper below: