Franchising Today - Fall 2016 - 9

CHIP CARDS

a chip card can prevent the fraudulent
transaction from ever taking place.

EquipmEnt Cost
A major consequence of the move to
chip-enabled cards is the cost of the
chip-capable processing equipment
to the franchised retailer. Franchisors have handled the cost in various
ways, but most have required their
franchisees to bear at least some of
the cost. That cost can vary based
upon the ability of the franchisee to
shop around and negotiate for the
best deal. Add to the mix that franchisees must have card-processing
equipment compatible with their
franchisor's point-of-sale (POS) system, and the ability to shop around
can be limited.
Another consequence is that merchants who do not accept chip cards
have seen the liability for chargebacks
for fraud shifted from the card-issuing
bank to the merchant. The tab for that
shift is now coming due. According
to some published reports, merchant
chargeback rates increased 15 percent
in the fourth quarter of 2015 over the
same quarter of 2014. That rate is expected to have accelerated in 2016.
Different franchise systems are
handling the situation differently,
although many are placing the responsibility for those chargebacks
on franchisees if they have failed to
transition to chip-enabled card processing equipment. Nevertheless, it
can be hard for franchisors and franchisees to guesstimate their potential
liability for fraudulent chargebacks
and weigh that potential cost against
the actual cost of new equipment.
What is clear is that the potential
cost of chargebacks is rising. While
recent studies seem to breakout fraud
at franchises, a recent report said that
only about 22 percent of all merchants

are currently able to process chip card
technology. That means there is fertile ground for fraudsters in the retail
universe, and they seem to be taking
advantage of it.
According to Visa, merchants using chip card readers saw fraudulent
transactions fall by 18 percent. In contrast, those not using chip card readers saw fraudulent transactions rise
by more than 11 percent.

implEmEntation DElays
Delays in having the equipment used
to read chip cards functioning and in
processing each transaction have become a significant hindrance to more
widespread chip card implementation. The delays in installation seem
to stem from just how many terminals
need to be updated and confirming
their compatibility with POS systems.
On the transaction front, Visa is
moving to speed up transaction processing by shortening the amount of

time chip cards need to be attached to
the terminal. If you've used a chip card
recently, you know that the attachment period can seem like it takes a
very long time. Given that Americans
have been sliding the magnetic strip
card in mere milliseconds for decades,
the idea of speeding up transactions
just makes common sense. In fact, I
traveled in Italy earlier this year. Chip
card transactions there went smoothly and quickly. We should at least be
able to match European transaction
speeds here in the United States.
There is an interesting and ongoing
debate, moreover, about the value of
chip and signature cards vs. chip and
personal identification number (PIN)
cards. As you may know, most of the
rest of the world has adopted chip and
PIN cards, not ones requiring signatures, as the gold standard of fraud
protection. As with an ATM transaction, customers using chip and PIN
cards must enter their unique PINs

It can be hard for franchisors and
franchisees to guesstimate their potential
liability for fraudulent chargebacks.

FALL 2016

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Table of Contents for the Digital Edition of Franchising Today - Fall 2016

Contents
Franchising Today - Fall 2016 - Cover1
Franchising Today - Fall 2016 - Cover2
Franchising Today - Fall 2016 - 1
Franchising Today - Fall 2016 - Contents
Franchising Today - Fall 2016 - 3
Franchising Today - Fall 2016 - 4
Franchising Today - Fall 2016 - 5
Franchising Today - Fall 2016 - 6
Franchising Today - Fall 2016 - 7
Franchising Today - Fall 2016 - 8
Franchising Today - Fall 2016 - 9
Franchising Today - Fall 2016 - 10
Franchising Today - Fall 2016 - 11
Franchising Today - Fall 2016 - 12
Franchising Today - Fall 2016 - 13
Franchising Today - Fall 2016 - 14
Franchising Today - Fall 2016 - 15
Franchising Today - Fall 2016 - 16
Franchising Today - Fall 2016 - 17
Franchising Today - Fall 2016 - 18
Franchising Today - Fall 2016 - 19
Franchising Today - Fall 2016 - 20
Franchising Today - Fall 2016 - 21
Franchising Today - Fall 2016 - 22
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Franchising Today - Fall 2016 - 24
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Franchising Today - Fall 2016 - 26
Franchising Today - Fall 2016 - 27
Franchising Today - Fall 2016 - 28
Franchising Today - Fall 2016 - 29
Franchising Today - Fall 2016 - 30
Franchising Today - Fall 2016 - 31
Franchising Today - Fall 2016 - 32
Franchising Today - Fall 2016 - 33
Franchising Today - Fall 2016 - 34
Franchising Today - Fall 2016 - 35
Franchising Today - Fall 2016 - 36
Franchising Today - Fall 2016 - 37
Franchising Today - Fall 2016 - 38
Franchising Today - Fall 2016 - 39
Franchising Today - Fall 2016 - 40
Franchising Today - Fall 2016 - 41
Franchising Today - Fall 2016 - 42
Franchising Today - Fall 2016 - 43
Franchising Today - Fall 2016 - 44
Franchising Today - Fall 2016 - 45
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Franchising Today - Fall 2016 - 47
Franchising Today - Fall 2016 - 48
Franchising Today - Fall 2016 - 49
Franchising Today - Fall 2016 - 50
Franchising Today - Fall 2016 - 51
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Franchising Today - Fall 2016 - 54
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Franchising Today - Fall 2016 - Cover3
Franchising Today - Fall 2016 - Cover4
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