Liability Shift Overview
For many years, the merchants were held liable for different e-commerce chargebacks because of frauds. Today, the authentication is bringing the positive benefits that come with liability shift. So what exactly is liability shift?
Now it means that the liability which comes from chargeback loss is shifting from the merchant back to the bank, for those e-commerce transactions where the holder of the card denies making a transaction, or for fraudulent transactions. The card issuing bank can no longer pass the chargebacks to the merchant.
How EMV can help your business?
Most of the credit cards today are equipped with EMV chip technology, which is the abbreviation of Europay – MasterCard – Visa. This standard describes the transaction that goes between the credit card and the terminal. This standard gets widely implemented today because it is much safer than the outdated magnetic stripe credit card transaction.
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Have you ever wondered why the visitors on your site are simply scrolling and walking away without making any purchases? What do you think might be causing this?
If you are a merchant, you are probably asking yourself how EMV can help your business. Well, first of all, the card authentication is more robust in protection against counterfeited credit cards.
Second, there are much less chargebacks that are related to fraud from stolen credit cards; third, there is cardholder verification as a way of protection against stolen or lost cards, and fourth, it gives bigger peace of mind to the customers.
So the main question now is – how your liability has changed?
It has changed in a way that starting from the date when you are enabled for card authentication – you are no longer held liable for some fraud-related chargebacks when the cardholder is denying that he or she have done any purchase. That means you should see a significant reduce in the number of fraudulent chargebacks.
Liability shift depends on many factors, such as credit card type, merchant and card issuing countries, and the authentication result. For example, transactions that involved personal debit or credit cards – Visa and MasterCard are offering worldwide protection for non-enrolled issuing banks and cardholders.
The following is some clarification of terms associated with liability shift:
- 3D Used – Authenticated – means that you are not responsible for chargebacks if the cardholder says that they did not used the card for making a purchase. The card-issuing bank is responsible for chargebacks for Maestro, MasterCard and Visa.
- 3D Offered – but Not Used – this standard is still not universal and not used everywhere. It means that MasterCard and Visa are offering you a worldwide protection for personal credit cards where the authentication has been tried, even if the card-issuing bank did not participate or if the credit card holder is not enrolled. Maestro only offers full protection for personal cards issued in the United Kingdom.
- eCommerce – Visa does not protect against chargebacks that are fraud-related.
Liability shift is a wide topic that evolves and there are still some things that need to be improved. However, it helps the merchants in the prevention of chargebacks that are connected with fraudulent usage of credit cards, or in situations where the cardholder is denying that he or she have used the card.
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