Chargeback Volume for 2016 Estimated to Be 21% Higher Than 2015

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EMV chip card being used in POS terminalWhile it’s no shock that chargebacks have been the biggest headache overall for merchants since the EMV Liability Shift began, a recent projection of how much money that amounts to is adding salt to the wound.

About 14.7 million chargebacks worth $5.8 billion are estimated to hit merchants this year, which is 17% more transactions and a 21% higher dollar value than in 2015, reports Digital Transactions.

Why Are Chargebacks Skyrocketing?

Fraudsters with stolen cardholder data are rushing to take advantage of merchants that are not EMV-compliant while they still can. And since it’s estimated that only about 30% of the nation’s total card-acceptance base is EMV-ready, the opportunity for fraudsters is large.

Those Flooded in Chargebacks Seek Justice

Some merchants flooded in new chargebacks are seeking retribution when possible. A supermarket operator in Florida filed a federal class-action lawsuit against the major card networks and eight of the largest card issuers because it sustained 88 chargebacks in four months, compared to only four in the same period the year prior.

“There is a ton of gamesmanship going on,” Julie Conroy, research director at Boston-based research firm Aite Group LLC, told Digital Transactions. Some merchants are complaining that issuers are taking advantage of rules to push through every chargeback – whether it’s related to fraudulent cards or not. Conroy says this is likely limited to a small minority, though.

New Policies from Card Brands to Alleviate Chargeback Issues

On July 22, Visa introduced a new policy, which stops all chargebacks for counterfeit fraud under $25 from going to acquirers and their merchants. In October, the policy will cap the number of these counterfeit card chargebacks at 10. This policy only stays in effect until April 2018 since all merchants are expected to be EMV-ready by then.

MasterCard is updating its rules as well, which involves adjustments to network intelligence to more accurately bar chargebacks from going to merchants when the transactions don’t meet network criteria for merchant liability.

Conroy expects the relief measures initiated by Visa and MasterCard to make an impact. Plus, as more merchants become EMV-compliant, the chargeback burden overall should go down in 2017.

Already EMV-Compliant? Rest Assured.

“For businesses that are EMV-compliant, if a fraudulent EMV card is used, it will either fail or the merchant will have chargeback protection,” Rob Kroeger, i3 Merchant Solutions’ director of integration, explains.

Learn More about How to Become EMV-Ready:

Contact i3 Merchant Solutions online or call 1-800-621-8931.

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