Chargebacks hit merchants not ready for EMV chip cards

While consumers may get frustrated having to wait longer when making a payment with an EMV chip card, EMV growing pains are hurting some merchants even more. Small businesses that have not upgraded their terminals to be EMV-compliant are now getting hit with chargebacks costing hundreds and sometimes thousands of dollars.

Small business owner Terry Lynn Raridon prides herself on a rigorous I.D. check for every purchase made with a credit card at her shop. When a customer recently disputed a charge after shopping there, she did what has always done and provided the card issuer proof of the purchase.

“We sent them a copy [of the receipt] showing here’s the customer’s name, here’s the copy where he signed the sales slip, here are the last four digits of his driver’s license number. And, yet still we were told ‘No, sorry. Because it was a chip card and you did not have a chip reader, this was irrelevant,” says Raridon.

As a single store business with only one point of sale, she thought she didn’t need an EMV reader. Now, she’s now chip-card ready.

“When we were told all of these stringent safeguards that we were taking weren’t enough, we had to invest in the technology,” says Raridon.

Card-issuing banks have become quicker to reverse charges any time an EMV card is swiped instead of inserted into a card reader. Merchants can challenge those disputes and have legitimate charges reinstated, but that takes time and a good record keeping system.

The Merchant Advisory Group, which represents large retailers, says overall chargebacks are ranging from $10,000 a week for smaller businesses to as much as $1 million a week for larger merchants.

Ken Givens, a payment processing expert with U.S. Merchant Payment Solutions, says he has many customers like Raridon who are now paying for not being ready.

“It seems like there may be some people – customers, who have cards with chips, they find businesses that do not accept the chip cards in the right way and they buy a product, dispute it, maybe knowing they’ll be able to keep it without having to pay for it,” says Givens.

Givens is encouraging all merchants to make the switch to an EMV-compliant system immediately. Most, like Raridon, can’t afford the cost of fraud.

“It’s not buyer beware anymore, it’s merchant beware,” says Raridon.

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Chargebacks hit merchants not ready for EMV chip cards

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