Are Your Customers Scamming You?
EMV was implemented to protect your customers’ pocketbook, but are they taking advantage of yours?
Is Fraud Still Possible with the Use of EMV Technology?
EMV technology (short for Europay, MasterCard and Visa) was implemented beginning in October 2015 to decrease the risk of fraud for card users, but what’s the risk of business owners? The new technology increases protection for consumers, but businesses may be liable for chargebacks. Make sure that you understand exactly what EMV is, how some people are still making fraudulent charges, and what you need to do to avoid fraudulent chargebacks.
How EMV Works
When EMV “chip-enabled” cards first came out in the U.S., many consumers and business owners were uncertain what the change meant for them. In essence, “chips” on EMV cards are virtually impossible to replicate, decreasing fraud on the behalf of the consumer when they “dip it” to pay for goods. However, as with any system, there are holes that criminals are targeting, and, in many cases, businesses are the party that is suffering.
Who’s Liable for Chargebacks?
In the past, credit card companies were held liable if a fraudulent charge was made. However, with new EMV technology laws, if the card isn’t “dipped,” the business is now held liable for the chargebacks, which means that some businesses will end up paying for the cost of the fraud instead of the credit card company.
While EMV technology is rolling out, or if you’re opting to not embrace EMV technology at your business, you will need to take extra steps to protect against fraudulent activity. Train your employees (and yourself) to always match the last four digits of a card to the receipt, expiration date and name, continue to check IDs, and to scrutinize signatures. One best practice states that if a card is declined always ask for another form of payment. Do not allow consumers to swipe the card instead.
Keep in mind that the best way to protect your business from chargebacks is to upgrade to EMV. If you already have EMV technology, stay vigilant during transactions to ensure consumers are dipping their cards and train your employees to require chip-dipping as well.
Fraudulent EMV Charges
Fraudulent EMV charges can come in a variety of forms, but two are becoming more and more frequent.
- EMV cards are “chip-enabled” but they still have a magnetic strip. This magnetic strip still exists for businesses that have not yet adopted EMV technology, but leaves a loophole for fraudsters to target. Some enterprising criminals are removing the magnetic strip from chip-enabled cards and are placing them on gift certificates. This makes the chip-enabled card appear to be a gift card, which cashiers then run as regular cards. Because the card isn’t dipped, when the charge is marked as fraudulent and is charged back to the business, the company is the one footing the bill.
- Some consumers have caught on and are taking advantage of chip technology with the use of their own credit cards. Consumers are scamming companies by intentionally swiping a chip-enabled card; if the cashier doesn’t correct the swipe and ensure that the consumer dips the card instead, the consumer then calls the credit company the next day claiming that the charge was fraudulent. Because the card was swiped and not dipped, even if the business can prove that the customer was in store, the liability will fall on the business. This act of fraud has particularly caught on in college towns where word of mouth and social media help to spread the word of “free” quickly. Imagine this scenario: a group will go to a bar, rack up a several hundred dollar bar tab, and will watch the bartender swipe and not dip the chip card. The next day they will call their credit card company and say there weren’t at that bar. The bar then becomes liable for the tab.
Protecting Against EMV Fraud
Unfortunately, fraud will never be completely eliminated. However, between efforts on the behalf of credit card companies and the use of credit card best practices by cashiers, risk will continue to decrease. Protect your company and your finances from fraud and chargebacks by fully implementing EMV technology.
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