Monday, May 9, 2016

WSJ: Stores that don't use the chip will eat the fraud

Business owners who haven't started accepting chip cards might want to think about doing so as the bill for fraudulent transactions shifts from the banks to the merchants.  The Wall Street Journal reported today:

For millions of merchants that haven’t yet met the credit-card industry’s deadline for accepting more secure plastic, the bill is coming due.

As of last October, retailers who didn’t make the transition to chip cards are on the hook for counterfeit transactions that used to be covered by card-issuing banks. The costs of the fraud, known in the industry as chargebacks, are starting to stack up.

A few weeks ago, a woman used a counterfeit card to buy $400 worth of gift cards at a Harps grocery store—and then hit nine more stores in quick succession after the first attempt worked, sticking the regional grocer with a tab for $4,000 that previously would have been absorbed by the card-issuing bank.....

Chargebacks among small and medium-size merchants rose 15% in the fourth quarter from a year earlier, according to a recent survey by The Strawhecker Group, a payments consulting firm. The industry believes the volume of chargebacks has likely risen since then, because the fourth quarter included only a few weeks under the new rules and it often takes a while for the costs to flow through to merchants....

Strawhecker, which surveyed 3.5 million small-and-medium-size card-accepting merchants, didn’t put a dollar figure on the chargebacks. Other experts said the total was probably in the tens-of-millions of dollars and will likely continue to rise....

The credit-card industry and retailers battled for a decade over rolling out chip cards, which are more secure but also require new payment terminals and take more time at checkout. The balance tipped against retailers after a spate of cyberattacks hit major chains such as Target Corp. and Home Depot Inc. and compromised millions of cards.

Target, Home Depot and some other large merchants, including Wal-Mart Stores Inc., are now processing chip transactions, but there are still plenty that haven’t installed the new equipment and are for the first time facing sizable costs for counterfeit transactions.

Financial institutions have been issuing the new cards to customers for more than a year, but just 22% of retailers are able to process them, according to a survey released last month by Boston Retail Partners. Another 53% of the merchants in the survey planned to install the systems within the next 12 months.

Some of them didn’t want to install the new equipment before the busy holiday shopping season and have been surprised to discover that there is a long wait to get it certified, according to payments executives and merchants.... Rest of article

15 comments:

Anonymous said...

Recently had my Debit Card number stolen, and several transactions were processed by Wal-Mart in TX. All info points to a breach in Wal-Mart's network, so I only use a chipped Credit Card now. Pay off the balance every month, and less risk of some nincompoop cleaning out my checking account.

Credik or Debra? said...

I have to use the chipped card at Kroger but nobody else has required it yet. I used another card for the first time ever when I ordered football season tickets two months ago. Soon after I made that transaction, six hundred dollars in computer equipment charges wound up being charged to that card.

Anonymous said...

Chip cards almost eliminate the risk of copying card info from in-person transactions. The unfortunate reality remains that most fraud occurs in environments where the card is not physically present and the number is used online. EMV does nothing to combat fraud in those situations.

Anonymous said...

Most businesses I have been to since receiving my chip card are not yet set up to use it.

Anonymous said...

Typically your bank is the one who loses money on refunding fraudulent charges, not the business

Anonymous said...

1:16 Just last week my debit card info was caught by Trustmarks Fraud Dept attempting to be used at a Texas Walmart. FWIW

Sure wish this was a LE priority.......

Kingfish said...

6:45: Actually read the whole post.

Anonymous said...

Who the hell wants to read posts before opining?

Anonymous said...

I've found a few places that utilize the chip reader, but several businesses that have the chip reader don't use it. The clerk says it doesn't work and to just slide the card.

Conservative Rankin Countian said...

A few months ago my credit card was hacked and the card shut down. I call the credit card company and they say somebody tried to charge several hundred dollars worth of merchandise in a big box store in the Midwest USA earlier that morning and the transaction was denied. So I get the info on the store and call the manager. Ask him if he has video at the registers. He does. Call the local police of the city where the fraud occurred and they tell me to file a police report in my hometown. Did that at 3 p.m. the day of the crime and get the Detective in the faraway town on the phone with a case number. They go to the store and view the video. 3 weeks later they call me with an update that the same 2 "democrats" had tried the same trick on 5 other people that same day and they've got the video evidence now trying to identify the perps. I hope I get the chance to take a vacation to the Midwest USA and file charges on these f*cksticks.

Anonymous said...

hmm...Kroger is still taking my chipless card as of last Friday. It'd be sad for me if they really don't now as my cards came out just before the chip machines and don't go out of date for a while yet.
My husband's card has a chip and those machines are SLOW.

Anonymous said...

Surely these technogeek wizbangs will figure out that the simplest way to "control fraud" is to embed the unique identification code directly into the user's body. You know, like a chip in the hand. Or even the forehead. Seems logical and reasonable. My suspicion would be that someone will figure that out. Seems like I've read about that kind of thing somewhere.

Anonymous said...

The chip transactions take so long to process compared to sliding the card. Hope to see that improve.

Anonymous said...

Wonder what this means for merchants who use iPhone Square card readers to scan credit cards (barbershops, nail salons, etc.)?

Anonymous said...

10:19 They'd be SOL. But as someone above stated, virtually ALL fraud event occur while you still have possession of the actual card.

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If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

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