Back in October 2015 a major shift in financial responsibility for credit card fraud took place. The coalition comprised of Europay, MasterCard and VISA (EMVCo) moved the liability for credit fraud from the banks to the merchant, if the merchant is not equipped to accept pin and chip transactions (known as EMV cards). This started a rapid demand for EMV payment solutions. In parallel the major banks began replacing existing consumer credit cards with pin and chip enabled cards.
Over the past several months, the nationwide shift to chip-enabled credit and debit cards has begun to take hold. Approximately 70 percent of U.S. cardholders have been issued chip cards, and more than 1.3 million U.S. merchants have upgraded their terminals to accept chip card payments.
EMV cards are intended to be more secure in part because they mitigate skimming, where scammers copy the information on the magnetic strip and use it to make duplicate cards. In fact, according to Visa, EMV cards have already made a significant dent in fraudulent transactions, reducing them by 18 percent across five U.S. retail segments that were among the 25 most inundated with fraud between the fourth quarter of 2014 and 2015.
The Lurking Danger
However, despite the progress, there’s still a long way to go before full adoption is achieved. According to CreditCards.com, between 63 percent and 88 percent of retailers in the U.S. have yet to upgrade their technology to accept EMV payments. As a result, these merchants are now even more vulnerable to fraud because they are financially liable for fraudulent charges – and are required to refund the consumer should they argue the charges and request a chargeback.
This scenario has given rise to a form of fraud – called “friendly fraud” – that was once considered an issue only for online or telephone card transactions where the cardholder does not physically present the card to the merchant for processing. Now, as a result of the liability shift, scammers are targeting merchants that are not equipped to accept EMV payments (meaning, they don’t have a chip-enabled card reader), contesting charges made with authentic EMV cards, and requesting a chargeback. And according to a report from CBS, 86 percent of all chargebacks are fraudulent.
One retail segment that has seen charge backs skyrocket through friendly fraud is the full-service restaurant vertical. Because many full-service restaurants are often independently owned, operate on thin margins, and aren’t in the financial position to make the significant investment required to upgrade their point-of-sale (POS) terminal – they are notoriously slow to adopt new payment technology. As a result, scammers have focused on these establishments knowing that they’re not able to accept EMV payments, providing a golden opportunity to dispute the charges.
However, some restaurant operators are finding that modernizing their payment technology isn’t so difficult after all – and doesn’t even require a POS upgrade. Operators such as Dickie Brennan’s Restaurants, based in New Orleans, and Emory’s on Silver Lake, just outside of Seattle, are turning to a technology that can augment their current POS, eliminating the need to upgrade it.
These restaurants have implemented our mobile pay-at-the-table platform that extends their current POS system designed exclusively for full-service restaurants, called the RAIL. The RAIL looks like your typical bill presentation folder, however, unlike a traditional folder, it serves as a mobile POS allowing guests to securely self-insert credit, debit or chip enabled cards – and conduct other valuable functions, like auto-calculating the tip, splitting the bill multiple ways, paying-by-item, and issuing email receipts. In addition to providing EMV and PCI compliance, Point-to-Point Encryption and other security features, the RAIL also provides restaurants with other benefits such as increased staff efficiency, higher survey response rates, reduced costs for paper receipts and staff hours, and increased customer satisfaction.
So while EMV may still seem like a tremendous hurdle for restaurants – and retailers in general – it’s never been more important to weigh the potential impact, and to take account of possible solutions. Despite the unique set of challenges that restaurant operators face, innovation is moving quickly and there’s technology emerging that can put security back in the hands of the consumer, and also protect restaurant operators – without breaking the bank.