Peril of New Chargebacks Could Bring EMV Into Focus for Unaware Merchants

A significant chunk—44%—of small-business owners have no knowledge of the EMV liability shift coming Oct. 1. That finding from “Small Business EMV Readiness,” a report released by Javelin Strategy & Research this week, suggests that many might be in for a shock when their merchant-processing statements arrive in November and December with chargebacks formerly borne by issuers.

“Small businesses are potentially going to bear a significant cost of fraud,” Michael Moeser, Javelin director of payments, tells Digital Transactions News. That’s because acquirers already have updated their systems to process EMV transactions, and issuers have mailed credit, and soon debit, cards bearing chips to consumers. Yet only 36% of small businesses surveyed planned to implement EMV acceptance in the next few months. “We see that as a big gap,” Moeser says.

It may also represent an opportunity for independent sales organizations and other merchant-services companies, offering them a different way to talk to merchants about EMV.

As the November and December processing statements arrive in their mailboxes, many merchants will question the chargebacks they’re seeing for the first time, perhaps realizing then the significance of the liability shift, Moeser says. If only to “ask about the chargebacks,” he says, merchants will at least want to have a conversation with their ISO.

Now, salespeople are no longer talking about chargeback liability in theory, but can now explain actual chargebacks and their reasons.

Merchants might consider that the fraud charges they have to pay, which may continue if they don’t adopt EMV acceptance, would outweigh the cost of buying an EMV-compatible terminal.

As for why a small business might not have adopted EMV, 27% of them cite lack of clarity as the primary reason for not adopting the payment technology, the report says. The reality of new chargebacks might bring EMV into focus, according to Moeser.

The Javelin report is based on online surveys of 250 small businesses collected in Oct. 2013 and Oct. 2014.