How the EMV Liability Shift Affects Your Restaurant

If you’ve been losing more money to chargebacks in the last few years, here’s why:

Card issuers have been switching customers to EMV cards to combat credit card fraud. EMV cards are also known as “chip cards” or “chip and pin”. They are harder to counterfeit, but their security only works when used with an EMV device at the POS. If you have been losing more money to chargebacks and you haven’t switched to EMV payments, you might be a victim of the EMV Liability Shift.

What is the EMV Liability Shift?

To encourage EMV adoption, card issuers shifted fraud liability to merchants who are not EMV-compliant as of October 2015. This is known as the EMV Liability Shift. It changes who’s responsible for paying for chargebacks.

How does the EMV Liability Shift affect my restaurant?

The 2015 Liability Shift has caused some confusion, so we’re here to clear a few things up for you:

Will I be fined if I don’t switch to EMV payments?

No, you will not be fined for not switching over to EMV, but it could still cost you in the long run. You could face huge costs in the event of a large data breach. Also, you may also be facing higher costs now, due to increased liability for fraud.

How am I more liable for fraud for not switching to EMV payments?

In our last post, we covered how EMV payments work, explaining that EMV payments are more secure because the chip devices use a unique code for each transaction. This makes it harder to counterfeit than the magstripe cards, where your private information never changed.

Not switching to EMV payments makes your point-of-sale the least secure point of the sale, so to say. This makes you liable for any fraud that comes through your business using a chip card.

Am I liable for all chargebacks now?

No, but you are more liable than you were before October 2015. If you haven’t made the switch to EMV payments, here are three scenarios to help you understand when you are liable for fraud.

Scenario 1:

Your Business: Not EMV equipped

Your Customer: Traditional magnetic strip card

In this scenario, nothing has changed. If the transaction is fraudulent, the merchant does not assume responsibilities. But card issuers have switched customers to EMV-enabled cards to reduce their liability. It is unlikely that your customers will be using magstripe cards in 2018.

Scenario 2:

Your Business: Not EMV equipped

Your Customer: EMV-enabled card

The customer has a chip card but swipes because your terminal is not EMV equipped.

This scenario is where your business could lose money. As stated on the Visa website, “If the purchase is a counterfeit transaction, the merchant generally holds liability, because the issuer has made the investment in chip technology to make transactions more secure while the merchant did not invest in upgrading to chip.”

Basically, if that sale was fraudulent, it’s your loss.

Scenario 3:

Your Business: EMV payment equipped

Your Customer: EMV-enabled card

This is the best case scenario for you. Here, both parties are using the most secure technology and are less susceptible to fraud. If the transaction is fraudulent, the card issuer generally assumes responsibility.

Here’s a handy infographic we found on the various situations.