Visa & MasterCard Move to Quell Merchant Losses from EMV

Emily VuittonChargebacks3 Comments

Visa MasterCard Chargeback Policy Changes

Last Wednesday, we dove into the current issues with EMV adoption by small and medium-sized businesses. Many of these merchants have already invested in EMV terminals, but are in a backlogged queue to have the terminal certified. Each individual payment card network has network-specific requirements based on EMVCo specifications. Which leaves the payment processors and terminal makers to test and certify the hardware for network-specific requirements.

The following day Visa announced in a press release that it will help accelerate EMV chip migration and deploy modified chargeback policies for merchants who are not yet chip ready. MasterCard wasn’t far behind, unveiling a new EMV chip terminal testing and certification program aimed at speeding chip adoption by US merchants via a press release.

Chargeback Policy Adjustments

Several beneficial changes were put into place regarding the certification process by both card issuers. But our focus is placed squarely on chargeback policy changes. What do these changes mean for merchants in a post-liability-shift world?

Visa’s Temporary Chargeback Policy Changes:

  • Effective July 22, 2016, Visa will block all U.S. counterfeit fraud chargebacks under $25.
  • Effective October 2016, issuers will also be limited to charging back 10 fraudulent counterfeit transactions per account, and will assume liability for all fraudulent transactions on the account thereafter.
  • These blocks will stay in effect until April 2018.

Reason Code Affected: Visa Reason Code 62

According to Visa, the above changes “together will significantly reduce the number chargebacks that merchants are seeing. Following these changes, merchants can expect to see 40 percent fewer counterfeit chargebacks, and a 15 percent reduction in U.S. counterfeit fraud dollars being charged back.”

MasterCard’s Temporary Chargeback Policy Changes:

  • The MasterCard network now has checks and blocks to ensure that chargebacks follow the liability shift guidelines.
  • MasterCard has policies in place that limit merchant exposure to excessive chargebacks on fraudulent accounts.

Reason Code Affected: MasterCard Reason Code 4870 and Reason Code 4871

MasterCard went on to reinforce that it is continuously evaluating thresholds related to the above policies to “ensure a balanced payment ecosystem.”

According to MasterCard, 1.4 million US merchants are now chip-active. Which sounds impressive, until you learn that there are roughly 5 million EMV-ready terminals in the US. Translating into less than one fifth of merchants (23 percent) that can actually accept EMV cards.

We hope these adjustments to chargeback policies will provide the leniency that’s so needed by merchants during this time.

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