by Michael Dattoma
Merchant chargeback fraud bill skyrockets due to EMV liability shift!
The liability Shift on credit card fraud is real and it’s hitting merchants where they feel it the most, in their wallets. Since the October 1st deadline there are some merchants that have experienced as much as a 20-fold increase in lost chargebacks because their equipment is not reading the EMV chip at their stores.
For a variety of reasons, many retailers have still not implemented EMV card readers, possibly due to the expense and need to upgrade their systems. Retailers who have yet to make these investments are now seeing the card-issuing banks push back all disputes to the merchants with no chance for victory. If there is any dispute on those sales, if the card was an EMV chip card and not properly read, the banks are using the liability shift to push that burden to the retailers. And for now at least, they are getting away with it.
If your stores are still unable to read EMV chip cards, and you are continuing to mag swipe these cards, you may have noticed a very disturbing trend as of October 1, 2015. That trend is one of automatically losing chargebacks on Visa and MasterCard transactions with no recourse.
On many routine chargebacks, where prior to October 1st they would have been 100% protected by Visa and MasterCard, retailers are now shocked to find that no matter how strong their defense, it is an automatic loss of the chargeback if the EMV chip was not read. The Visa and MasterCard card issuing banks are leveraging the EMV liability shift to reduce their fraud burden every opportunity they can and if it is an EMV card that is in question, the easy and legal decision is to push the loss back to the retailers when the chip was not read.
Retailers who were lagging in EMV readiness are now seeing the true cost of not upgrading their software and hardware for EMV, especially if they have a high average ticket where lost chargebacks are especially painful.
Retailers that do not have the ability to read EMV cards will be most vulnerable to all the stolen and fraudulent cards that are circulating in the market. They will be the soft target for fraudsters, along with e-commerce. If any of those stolen cards are swiped and used successfully at a retail location, there is almost a 100% probability that sale will result in a lost chargeback to the retailer. Those are odds no retailer can afford to take.
You need to make the investment to accept EMV Chip and Pin cards so you are no longer a sitting duck in chargebacks disputes. The card industry has merchants over a barrel at the moment and the only cure is to have the ability to read the EMV chip at the Point of Sale, or face the consequences.
If you would like more information on EMV readiness you can contact Michael Dattoma at Michael@retailmerchantservices.com.
by Michael Dattoma
EMV related chargebacks are surging due to the EMV liability shift on October 1st.
On many routine chargebacks, where prior to October 1st they would have been 100 percent protected by Visa and Mastercard, retailers are now shocked to find that no matter how strong their defense, it is an automatic loss of the chargeback if the EMV chip was not read. The Visa and Mastercard card issuing banks are leveraging the EMV liability shift to reduce their fraud burden every opportunity they can and if it is an EMV card that is in question, the easy and legal decision is to push the loss back to the retailers when the chip was not read.
Retailers who were lagging in EMV readiness are now seeing the true cost of not upgrading their software and hardware for EMV, especially if they have a high average ticket where lost chargebacks are especially painful.
Retailers that do not have the ability to read EMV cards will be most vulnerable to all the stolen and fraudulent cards that are circulating in the market. They will be the soft target for fraudsters, along with e-commerce. If any of those stolen cards are swiped and used successfully at a retail location, there is almost a 100% probability that sale will result in a lost chargeback to the retailer. Those are odds no retailer can afford to take.
If you would like more information on EMV readiness you can contact Michael Dattoma at Michael@retailmerchantservices.com.
by Michael Dattoma
Is your retail business a “winner” or a “laggard”? That was a question posed in a recent retail survey by Retail Systems Research (RSR).
The survey was conducted to see how well retailers were responding to challenges and opportunities that new customer demands and technologies have pressed upon them. They divided retailers into two camps, “winners”and“laggards” based on their success in responding to these challenges.
What camp do you think you are in right now as we close out 2015?
Almost all retailers in the survey felt that omni-channel was the future revenue growth opportunity, and they wanted to drive customer engagement through connected devices (iPads, androids) across channels, and differentiate from the competition. They understand that delivering a consistent brand experience through mobile, e-commerce and in-store is critical to their future success.
It was the response to some of these major challenges that determined the winner or laggard status:
- Are they getting FASTER, responding faster to the customer in this age of fast fashion. Are they using speed to make smart planning and allocation decisions?
- Do they have the data driven decision making ability to shrink down execution time to respond to market conditions at the store/e-commerce?
- Can they respond to sudden changes in consumer trends which demand they move more quickly?
- Do their systems operate in real time to allow them to get info quickly?
- Do they have the inventory visibility so that that inventory is a shared asset, for all channels, store and web?
Clearly there is a need for speed, a new bar that Fast Retailing has set that retailers must acknowledge and respond to. I am not suggesting you need to move at the speed of an H&M or a Rue21 but you can learn from what they are doing to succeed in today’s retail. It is clear that the FASTER retailers, those who step up to these challenges would lead and win in the competitive retail battlefield.
The big takeaway was that it was impossible to execute on an omni-channel strategy without VISIBILITY to inventory, between stores, the warehouse, e-commerce in real time. That if inventory was not treated as a shared asset you could not fulfill between Web and Store, and know every stitch of inventory to share across channels in real time. And it’s not just inventory visibility but customer visibility across channels that are the biggest factor to drive revenue and the hardest to achieve for most retailers. The WINNERS are creating a consistent experience to their customers across all channels and to do that you need visibility.
Does your business currently have that speed , that visibility?
As we get ready to enter a new year, now is the time to consider what you need to do to get your business into the WINNER column in 2016. It is time to get more visibility to your inventory, visibility to your customers across all channels and deliver the customer experience and service level needed to compete and win.
If you would like more information on how retailers are handling these challenges you can reach out to Michael Dattoma at michael@retailmerchantservices.com
by Michael Dattoma
Q: I am looking to make changes to my store technology. I have nine retail stores that are on a 12-year-old system and I have an e-commerce site that runs separate from my retail stores. With all I see and hear about omni and multi-channel, what do you suggest as a starting point to use technology to help get closer to the customer? Something that I can have so that my staff can know the customer better and keep them returning. It’s a tough environment for a retailer with the web competition and I want to make smart investments to stay relevant.
Michael Dattoma: More than ever, the store and web must offer an experience to the customer with the ability to engage them in ways that separates you from the competition. There are many ways that retailers are doing this to offer a unique experience that creates a “wow” factor, that make a customer feel valued, entertained, listened to, serviced, and drives revenue while making loyal customers.
There are many paths that customers are taking to your door, either by physically visiting your store or through e-commerce and mobile, and the experience that those customers receive must be consistent across all your channels. Your store cannot operate in silos where you know the customer at the store, but have no idea who they are online. You have to know their preferences, their history, loyalty points, gift card balances, when the shop on the web. The customer expects to be treated consistently across all platforms.
So much of what we are discussing, in terms of creating that customer experience, is done by leveraging technology. It used to be that retail technology was just about controlling your inventory, have a CRM that tracks your customer purchases and you were done. But today’s retail environment, when there are multiple channels, when you customer is now “universal,” where they are mobile and on the web, and need to be the center point of your business, that is not enough. In this environment you need a central customer record, a central inventory record that every channel can feed from, where they function as a central hub of your operation. When that is accomplished, and you can then provide real time information on customers and inventory across all channels, then you have the foundation that allows a powerful “customer experience” to be unleashed.
Once you have that fundamental architecture in place then providing that rich customer experience becomes far easier. The customer can travel to the store, the web, mobile, and everything about that customer is known. Recommendations can be made to them, offers and promotions can be sent to them based on past shopping experience and value to the business. They can use loyalty and gift card balances across all channels, they can buy online and pick up at the store, buy online and return to the store, and all of it is easily managed because all of the data is real-time and shared.
With this foundation in place you can have sales associates on the floor engaging customer with iPads with the ability to see real time inventory, customer buying history and view up-sell suggestions based on those purchases. You can also view product catalogs, purchase and deliver an item from another location if it is not in stock, and recall everything and every preference for that customer. This allows you to do what Jack Mitchell of Mitchell’s and Richards famously said, “Hug your customers.” Technology, coupled with smart retailing, and great sales associates who leverage it, allows you to bring a memorable customer experience to life across all channels and “Hug” with greater impact.
A customer that bought an item on the web can have it waiting for them at the store to try on, with the offer of their favorite music and drink while they are in the dressing room. They can be given an experience while in the dressing room like no other. One luxury retailer who is taking the customer experience to another level is Rebecca Minkoff. Rebecca’s “store of the future” offers a mind blowing interactive digital experience coupled with the human touch. Dressing rooms with interactive mirrors where customers can change sizes, see what pairs well with items already selected, and receive emails and follows-ups on items that were tried on but not purchased that day. According to Fortune magazine, these technologies have helped Rebecca Minkoff increase year over year sales by 50 percent. That is stunning and drives home the importance of delivering a memorable customer experience.
You may not be ready to take the leaps to deliver your own “store of the future” but you can certainly start to build the foundation that will allow you to deliver a customer experience best suited to your own style and store culture. The important thing is to not let inertia set it, but step-by-step put the technology pieces in place that will allow you to survive and thrive.
If you would like more information on innovative retail technologies and how to leverage some of the tools discussed, please contact Michael Dattoma at Michael@retailmerchantservices.com
by Michael Dattoma
Q: I have not done anything to prepare for EMV chip-and-PIN card acceptance. What happens if I am not ready by the deadline? Is this just like PCI compliance where I am only penalized if there is a data breach?
Michael Dattoma: The clock continues to tick, and the October 1 liability shift, where merchants will be 100 percent responsible for credit card fraud if they do NOT have the ability to accept EMV chip-and-PIN cards, is upon us. As you suggested, I think many retailers inaccurately think this is about PCI compliance when it is not. Sure it helps increase security, but this is all about money, about who pays for fraud. The liability shift places the fraud firmly on the shoulders of retailers that are unable to accept EMV chip-and-PIN cards as of October 1, 2015. PCI compliance only hits you financially if there is a data breach; this liability shift hits you immediately for any fraud after October 1, 2015.
Just so it is clear, if you are not EMV chip-and-PIN ready you will be liable for any fraud. If there is a fraudulent sale on a stolen card for $1,000, you will now own that fraud, not the credit card banks, if you do not have EMV chip-and-PIN readers. If you do have the readers, the banks will still assume the fraud liability. So the obvious conclusion is to make sure you can accept chip-and-PIN cards by October 1.
I first wrote on this upcoming liability shift way back in October 2013 and now we are only two months away to the most impactful shift in fraud liability the credit card industry has ever seen.
If you have not yet addressed this issue, if you have not made plans to get the proper software/hardware so you can accept EMV chip-and-PIN cards, the time to act is now. It may be a combination of responsibilities between your POS provider and your credit card processor that will be required to get this done. You will need a hardware device, typically a terminal that has the ability to accept EMV chip-and-PIN, mag swipe cards and have an NFC reader for Apple Pay. If you are going to make hardware changes to accept EMV chip-and-PIN you certainly want to have the ability to accept mobile payments such as Apple Pay, Google Wallet and Samsung Pay. The terminal will be integrated with your POS software in most cases.
The U.S. has been the laggard with EMV chip-and-PIN. The U.S. is responsible for over 50 percent of global credit card fraud so it is time for EMV to hit our shores in a big way as it has across Europe and Latin America. When countries implement EMV chip-and-PIN they see dramatic drops on in-store credit card fraud: 70 to 90 percent reductions in some countries.
As we move into August, typically a slower time for most retailers, now is the perfect time to get your store’s EMV chip-and-PIN set up.
If you would like more information on getting your stores EMV chip-and-PIN ready for the October 1 liability, you can contact Michael at Michael@retailmerchantservices.com
Recent Comments