Opportunities For Partners In Credit Fraud Liability Shift

Retailers across the country should have October 1st circled on their calendars, and if they don't, they'd better start saving up.

Beginning this October, Credit card issuers such as Mastercard and Visa are shifting the liability for fraud onto merchants and off of themselves as part of changes to the EMV (Europay, MasterCard and Visa) standard. This means if a retail store is hit with a breach, or a case of credit card fraud is traced back to their business, they will be held responsible for the financial burden.

In order to prepare for this, retailers must update the hardware and software of their payment terminals to support the new and secure chip-card technology that is being rolled out by major card issuers. Distributors such as ScanSource have invested heavily in this opportunity and are assisting reseller partners in the point of sale space to talk to customers about upgrading their terminals.

In a survey conducted by financial software maker, Intuit, of 504 small businesses based in the U.S., 42 percent had not even heard of the EMV October liability shift date.

Allen Friedman, Director of Payment Solutions at Ingenico Group, says that Tier 1 businesses will have wide adoption rates while SMBs are lagging behind.

"Once the bigger merchants have implemented EMV, and [attackers] can't use their counterfeit cards there, then those counterfeit cards will move down the chain to smaller merchants," Friedman said in a webcast for partners and media held by South Carolina-based distributor, ScanSource.  "They're not their No. 1 target today, but they will become their No. 1 target once the bigger merchants become protected."

It comes as no surprise that the numbers indicate credit card fraud in the United States is on the rise. According to the Nilson Report, a Carpinteria, Calif.-based payment industry newsletter, the U.S. is taking 25 percent of all transactions globally, but is accounting for roughly 50 percent of all credit card fraud. Credit card fraud has doubled since 2007, surpassing 10 cents per every $100 transacted, and increasing. A total of $10 billion in credit card fraud is expected this year, up from $8.5 billion in 2014.

Beatta McInerney, business development manager for the ScanSource Payments division, said during the webcast that credit card fraud is continuing to happen in the U.S. because of vulnerabilities built into  the magnetic stripe card. The U.S., McInerney said, is the last modern industrial country in the world to adopt the EMV standard. "It makes us an easy target," she said. "Credit card fraud is increasing rapidly in the U.S. and SMBs are being attacked just as much as large retail chains."

McInerney says conversations between partners and customers regarding upgrading retail terminals are difficult because there's no clear ROI in in making the changes.

"At the end of the day, there is not an ROI because there are a lot of things we don't know, such as will a company get breached? We don't know that," she said on the webcast. "We are unable to predict how much counterfeit credit card activity a merchant will have."