Retailers Frustrated About Chip Card Terminals They Can’t Turn On, Liability For Fraud

Image courtesy of Dennis S. Hurd

A grocery store chain in Florida made headlines last week for filing a lawsuit against a consortium of credit card issuers for delaying their certification to process payments on the EMV (chip card) payment network. They aren’t alone, though: many other medium-size chains and other businesses have had their certification delayed, which is costing them thousands or tens of thousands of dollars now that they’re liable for fraudulent transactions.

Last month, we shared speculation from some experts about the possible reasons why retailers have installed new payment terminals, but are still only using the magnetic stripe slot. They speculated that smaller retailers didn’t expect to be targets for fraud, or didn’t want to take the time to instruct people in their communities about how to leave their cards in the readers rather than swiping. Retailers are now speaking out, and say that those aren’t the reasons, and they have been targets for fraud and erroneous chargebacks.

The owner of New York grocery chain Morton Williams told the New York Times that they’ve already had thousands of dollars in fraudulent purchases, after spending $700,000 to outfit all of the chain’s stores with new card readers. Everything was installed last year, and he’s now waiting for certification.

The result is that consumers are seeing a lot of signs like this across the chip readers when we shop.

Certification is important, since the October 1, 2015 EMV liability shift means that if a retailer didn’t have its chip payment system up and running by October 1, liability for fraud or other payment shenanigans would fall on retailers. Once they have the system running and are processing payments in a more secure way, liability goes back to the banks.

While retailers accuse the banks and payment processors of taking too long to certify their systems, banks turn around and blame the retailers for waiting until the last minute to install their new systems when they had a few years’ warning before the EMV shift happened.

“I think there are merchants who should have been prepared and aren’t,” one industry analyst told the Times. Some small and medium businesses may have also thought that they were prepared for the shift when they weren’t.

Chip-Card Payment System Delays Frustrate Retailers [New York Times]