One of the unintended consequences of merchant protections prior to the EMV liability shift in October is that they shielded retailers from seeing a lot of the fraud going through their stores. The problem? That caused quite a few smaller merchants to reach the erroneous conclusion that the frauds that they didn’t see didn’t exist.

“We’re now just seeing the fraud that always existed,” said Georgia Stavrakis, the senior director of loss prevention at Heartland Payment Systems and the secretary of MAC.

Stavrakis, the guest for this week’s podcast, has seen a lot of retailers who looked at their level of known fraud and chose to not bother implementing EMV. In short, the fact that they were shielded from seeing their true fraud rate caused them to not fear having to pay for their fraud. The liability shift, therefore, didn’t frighten them.

“People were misinterpreting the data that we had from before the shift. People were looking at their records, saying ‘OK, I’ve never had a chargeback in 16 years so I don’t really care when the liability shift comes because I won’t have a dispute,'” Stavrakis said during the podcast. “The reality is that you could have had hundreds of thousands of fraudulent transactions at your location before October. You just didn’t know about it because the bank wasn’t going to waste its time or money to send that to you.”

Another myth: “There was some guidance that is out there that suggested that verticals like restaurants, vending machines, were not going to be a target for this kind of fraud because they didn’t traditionally see this kind of fraud. The reality is that that’s not true,” Stavrakis said.

That theory had been that the fraud would be seen at high-value stores, such as jewelry. The reality has been that thieves have been more of the amateur type and their focus has been on smaller dollar-value merchants so that the thefts would be smaller and their exposure would be less. Result: small merchants, especially restaurants and vending machine operators, got hit the hardest.

The podcast lasts only 10 min., 22 seconds, and looks at the slow EMV transition from an LP perspective.

EMV Liability Shift Delivering Surprises To Restaurants

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