American Express To Update U.S. Fraud Policies To Limit EMV Chargebacks for Merchants

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Policy Changes Aim to Reduce Fraud Costs for Merchants While Promoting Further Adoption of EMV

NEW YORK–(BUSINESS WIRE)–In an effort to promote further adoption of EMV in the U.S., American Express (NYSE: AXP) today announced changes to its EMV chargeback policy to help merchants limit their fraud costs as they upgrade their point-of-sale systems. By the end of August 2016, merchants will not be held liable for chargebacks for counterfeit fraud when a transaction is under $25. In addition, by the end of 2016 American Express also plans to limit the number of counterfeit fraud chargebacks to a total of 10 per card account. The card issuer – not the merchant – will bear the financial liability for any additional counterfeit fraud transaction that is disputed on a card account after 10 chargebacks. This limit does not prevent a Card Member from disputing additional fraudulent transactions.

“We recognize the migration to EMV in the U.S. is an effort that will take time, which is why we are making these policy changes in order to provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards.”

“Combating fraud is an ongoing priority for American Express,” said Mike Matan, Vice President, Global Network Business, American Express. “We recognize the migration to EMV in the U.S. is an effort that will take time, which is why we are making these policy changes in order to provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards.”

The changes announced today by American Express will remain in effect until April 2018. The changes are expected to help reduce counterfeit fraud costs for merchants who have not yet upgraded their point-of-sale terminals to accept EMV chip cards. An analysis by American Express found that more than 40% of its counterfeit fraud chargebacks in the U.S. are for transactions under $25.

EMV technology reduces the risk of fraud stemming from counterfeit payment cards by storing information on a microprocessor chip embedded in a card. Card Members dip or insert their EMV chip cards into a merchant’s payment terminal instead of swiping their cards. Under a Fraud Liability Shift implemented by American Express in October 2015, the party – merchant or card issuer – with the least secure form of technology is responsible for counterfeit fraud costs.

American Express earlier this month announced the availability of Amex Quick Chip, which enables Card Members to dip their chip card during the check-out process and remove it before the transaction is completed. This can reduce the time Card Members must keep their Cards inserted in the terminal, providing an experience similar to swiping a magnetic stripe card and enabling merchants to streamline the checkout experience. American Express also offers merchant acquirers a self-certification program that allows them to perform the tests necessary to certify merchants’ point-of-sale devices for EMV chip card acceptance. The program enables merchant acquirers to complete the required POS certifications within as little as a few hours. Today, the vast majority of U.S. POS certifications on the American Express Global Network are performed using the self-certification program.

For more information about the self-certification program, merchant acquirers can visit: https://network.americanexpress.com/en/globalnetwork/certification/.

About American Express

American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com.

American Express Launches Quick Chip Service to Provide a More Seamless Process for EMV Chip Card Transactions at Point of Sale

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Service is Available to Help U.S. Merchants Streamline the Check-Out Process When Card Members Pay With Their Chip Cards

NEW YORK,  June 15, 2016 — 

American Express today announced the availability of Amex Quick Chip, a technology that enables merchants to provide a more seamless experience at the point of sale for Card Members when they pay with their EMV chip cards. Amex Quick Chip is available to merchant processors, which may deploy the service to interested U.S. merchants through a software update to the merchants’ EMV-enabled payment terminals. This provides another option for merchants in industries where having a fast check-out process is especially important.

EMV technology reduces the risk of fraud stemming from counterfeit payment cards by storing information on a microprocessor chip embedded in a card. Card Members dip or insert their EMV cards into a merchant’s payment terminal instead of swiping their cards. With Amex Quick Chip, Card Members can dip their Card during the check-out process and remove it before the transaction is completed. This can reduce the time Card Members must keep their Cards inserted in the terminal, providing an experience similar to swiping a magnetic stripe card and enabling merchants to streamline the checkout experience. Importantly, Amex Quick Chip continues to offer the same protection against counterfeit cards that traditional chip card technology does.

“Reducing friction for Card Members and merchants is a key priority for American Express,” said Mike Matan, Vice President, Global Network Business, American Express. “Amex Quick Chip provides merchants operating in industries where fast checkout speed is critical with an option for ensuring Card Members can quickly and efficiently pay for purchases with their EMV chip cards.”

Amex Quick Chip is compatible with the technical standards used in Quick Chip services offered by other payment networks, enabling processors and their merchants to easily implement these solutions across all card brands that they accept.

Amex Quick Chip is currently available to processors, merchants and vendors in the U.S. Interested parties may download the Amex Quick Chip Technical Manual at www.amexglobalnetwork.com/amexquickchip to review implementation requirements for the service. Merchants that want to upgrade to Amex Quick Chip should contact their point-of-sale provider.

About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com.

NRF Says Overturning Dodd-Frank Would Reinstitute Price Fixing by Card Companies

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June 7, 2016 WASHINGTON – The National Retail Federation today released the following statement after Rep. Jeb Hensarling, chairman of the House Financial Services Committee, announced plans to repeal swipe-fee reform and the Dodd-Frank Wall Street Reform Act.

“Today Jeb Hensarling announced that he wants to repeal an important competitive change in Dodd-Frank reform and return to the bad old days when card companies and banks freely picked the public’s pocket,” NRF Senior Vice President and General Counsel Mallory Duncan said.

 

“Protecting bank profit margins at the expense of competition is not sound public policy and it will harm merchants and consumers. The financial services industry attempted to get Congress to reject transparency and competition in 2010 and again in 2011. Both efforts failed. On behalf of retailers and their customers, NRF will fight for free and open markets.”

Swipe fees on debit and credit cards are many retailers’ second-largest operating cost, behind labor. These fees threaten small retailers with failure and keep merchants from hiring and expanding, slowing the entire economy. Exorbitant swipe fees also mean consumers pay higher prices. American merchants and consumers still pay the highest swipe fees in the world on debit and credit cards, according to the Federal Reserve Bank of Kansas City.

Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Federal Reserve was required to adopt regulations that would result in debit swipe fees that were “reasonable and proportional” to the actual cost of processing a transaction. Federal Reserve staff calculated the average cost at 4 cents per transaction and proposed a cap no higher than 12 cents. Nonetheless, after heavy lobbying from banks the Federal Reserve Board of Governors eventually settled on 21 cents plus 0.05 percent of the transaction for fraud recovery and allowed another 1 cent for fraud prevention in most cases. The cap, which applies only to financial institutions with $10 billion or more in assets, took effect in 2011 and totals about 24 cents on a typical debit card transaction.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. nrf.com

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What is Auth Code 51, declined?

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A credit card processing response of Auth Code 51, is a decline for insufficient funds, the credit limit has been exceeded. What happens when the customer says, “there’s nothing wrong my Visa card, put it through again”? If put through again without a voice authorization, the merchant is at risk for chargeback of funds for invalid authorization.

Visa Product and Service Rules, 8.4.1.3 Original Credit Transactions – Prohibition against Clearing a Declined Transaction

An Originating Member must not send an Original Credit Clearing Transaction if it received a Decline Response to the corresponding Authorization Request.

Further information at page PSR-564, 11.1.16 Chargeback Reason Code 71 – Declined Authorization. NEW. Effective for Transactions completed on or after 15 April 2016,
A Transaction for which Authorization was obtained after a Decline Response
was received for the same purchase. This does not include an Authorization
Request that received a Pickup Response 04, 07, 41, or 43 or was submitted
more than 12 hours after the submission of the first Authorization Request.

This period is known as the black hole or dark period. For the first 12 hours after a decline, merchants should not attempt to process the same retail transaction. The reality is a consumer could simply walk away and go back to another cashier and try again. Some cloud based payment gateways will enable merchants to choose to prohibit multiple attempts in the black hole period.

Disclaimer: The rules of card acceptance are very complex. Merchants should read the manual for complete details regarding card acceptance for your business type.

Retailers Ask FTC to Investigate Credit Card Industry’s PCI Security Group for Antitrust Concerns

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WASHINGTON – The National Retail Federation today announced that it has asked the Federal Trade Commission to conduct an investigation into an organization founded by the credit card industry that sets data security standards, saying the group’s controversial practices raise antitrust concerns.

“We urge the FTC not to rely on PCI DSS for any purpose, particularly not as an example of industry best practices nor as a benchmark in determining what may constitute responsible data security standards in the payment system or any other sector,” NRF Senior Vice President and General Counsel Mallory Duncan said in a letter to FTC Chairwoman Edith Ramirez and other commission members.

The Payment Card Industry Security Standards Council is “a proprietary organization formed and controlled by a single industry sector – the major credit card networks” and “fails to meet any of the principles adopted by the federal government for voluntary standard-setting organizations,” Duncan said. “We believe you will conclude PCI itself is an inappropriate exercise of market power by the dominant U.S. payment card networks and PCI should not continue setting data security standards through its current processes.”

NRF’s request comes as the FTC is conducting an inquiry into how third-party companies perform assessments of PCI compliance by retailers and other businesses that accept credit cards. NRF understands that the FTC is also considering PCI requirements as an example of industry best practices.

The PCI council was formed in 2006 by the major credit card companies – Visa, MasterCard, American Express, Discover and JCB. It imposes its rules on millions of U.S. businesses but continues to be governed by an executive committee made up of representatives of only those five companies.

In a 19-page white paper submitted to the FTC, NRF said the card companies use their market power to “unfairly leverage their brands and proprietary technology through webs of closely controlled interdependent bodies and compliance regimes” including the council. While portrayed as voluntary, the Payment Card Industry Data Security Standard requirements set by the council are “forced upon businesses that cannot refuse to accept credit and debit cards.”

The council’s practices “raise antitrust concerns” for a number of reasons, including “general antitrust dangers when competitors collaborate on setting market standards” and “more targeted concerns insofar as they allow the networks to leverage their proprietary technology,” the paper said.

Among other concerns, PCI requirements act as “as an anticompetitive barrier to innovation” because they “exhaust” funds and other resources retailers have available for data security, the paper said.

NRF asked that the FTC investigate the council’s practices in general and particularly their impact on competition. The FTC should also reject government use of PCI standards as any benchmark for data security, and instead work with “legitimate U.S. standard setting bodies” such as the American National Standards Institute, NRF said.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. NRF.com