EMV: Not Ready for Prime Time?National Restaurant Association's Matthews Says Small Merchants at Disadvantage
Dave Matthews, executive vice president and general counsel of the National Restaurant Association, which represents more than 500,000 restaurants throughout the country, says the group questions whether EMV is really ready for "prime time."
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Small and independent restaurants have seen significant upticks in chargebacks for alleged fraudulent transactions since the EMV fraud liability shift took effect in October 2015. And Matthews alleges that's unfair, given the current state of EMV and the questions about whether all the transactions cited for chargebacks are actually fraudulent.
"We see a number of hurdles that still have to be overcome," Matthews says during this video interview at Information Security Media Group's recent Fraud and Data Breach Summit in San Francisco. "Only half of the consumer public has chip-enabled cards at this point in time. There are still an awful lot of cards that need to be issued. And secondly, there's a huge backlog of certification of [EMV-ready] point-of-sale hardware and software that needs to get through EMVCo's pipeline before that equipment is readily available to most small merchants."
Smaller restaurants have been put at an EMV-migration disadvantage, Matthews argues. While larger merchants with higher transaction volumes have been able to demand more immediate EMV certification for their point-of-sale systems and devices, smaller merchants have had little say in when their terminals are certified as EMV compliant, he contends.
As a result, smaller restaurants are seeing massive amounts of chargebacks for magnetic-stripe transactions believed to be fraudulent, Matthews says. If these merchants had EMV-certified equipment, they would not be liable for the chargebacks.
A lawsuit filed last month against the card brands and top issuing banks by two small merchants in Florida raises many of these issues (see Merchants Ask Court for Relief from EMV Liability Shift).
"Part of the problem is that it's difficult to ascertain what the causes of those chargebacks are," Matthews says. "When a charge is questioned by a consumer, that's lumped in a fraud category. When a counterfeit card is used, that's lumped into a fraud category. Frankly, when there's a coding error or a transaction error, that's lumped into a fraud category."
So it's difficult to know which chargebacks are actually linked to counterfeit-card purchases, Matthews claims. "We need some help from the [card] brands and from the issuing banks to ... understand what kind of charges we're actually seeing," he says.
During this interview, Matthews also discusses:
- Why the association, which once said small restaurants didn't need EMV, now believes that upticks in chargebacks have made migration to EMV a necessity;
- Why he believes that EMVCo, which oversees EMV specifications, and the card brands have an obligation to help smaller merchants with their EMV migrations; and
- Why more lawsuits related to EMV inequities are likely to be filed by smaller merchants.
At the National Restaurant Association, Matthews is responsible for all legal matters and is involved in business development, partner products and international development activities. He has extensive experience in technology, data security and financial services. Matthews previously served as executive vice president of business development and innovation, and senior vice president of technology and operations for the NRA. Before joining the NRA, Matthews was senior vice president for technology and operations of the Federal Home Loan Bank of Chicago.