Jewelers’ Security Alliance Credit Card Alert!
Beginning in October 2015 the rules of liability for fraudulent credit card transactions will change and jewelers need to be aware of possible new chargeback risks. Credit cards with small metallic square computer chips, so-called EMV technology, are being issued by the financial institutions. The purpose is to make credit cards harder to counterfeit than the current cards with magnetic strips on the back. It is estimated that by the end of 2015, 70% of credit cards will support EMV. These cards currently being issued will be able to utilize either the EMV chip or the magnetic strip on the back.
Previously, for in-store transactions, if the retailer swiped a card, followed proper procedures, and got an authorization, the retailer would ordinarily not have a chargeback, even if the card or transaction was fraudulent. The liability fell on the payment processor or issuing bank. Under the new rules adopted by the major credit card companies, if a customer presents a card with an EMV chip, and the retailer does not use a new card reader compatible with EMV chip technology, the liability for a fraudulent transaction will fall on the retailer. If the retailer uses an EMV card reader, the liability in fraudulent credit card transactions will still fall on the payment processor or issuing bank, not on the retailer.
The average cost of a new card reader to accept EMV transactions is reported to be approximately $500-$1,000. Jewelers’ Security Alliance (JSA) advises all jewelers to obtain the new card readers if they have not already done so.
By no means is this a silver bullet to stop credit card fraud, which is a major problem for jewelers. Even with the EMV technology, credit card transactions by telephone or through internet orders will continue to present the same risks as at present. The liability for fraudulent transactions when the card is not present in the store will continue to fall on the merchant. It is predicted that criminals will now make even greater use of fraudulent telephone and internet orders.