business news in context, analysis with attitude

The Wall Street Journal has a story about how the costs of credit fraud "are starting to stack up" for retailers who now have to bear the cost of such fraud because of new rules that were implemented when the financial services industry transitioned to chip-based cards that were supposed to reduce such fraud.

The problem, as has been well-documented here and elsewhere, has been that even retailers that have bought the new chip-enabled terminals have not been able to accept chip-based cards because of delays in getting the terminals certified by the banks. The result, retailers argue, is a system that now has taken banks off the hook for fraud costs even though they largely have been responsible for the retailers not being able to take the safer cards. The story notes that "financial institutions have been issuing the new cards to customers for more than a year, but just 22% of retailers are able to process them."

The Journal writes that "chargebacks among small and medium-size merchants rose 15% in the fourth quarter from a year earlier, according to a recent survey by The Strawhecker Group, a payments consulting firm. The industry believes the volume of chargebacks has likely risen since then, because the fourth quarter included only a few weeks under the new rules and it often takes a while for the costs to flow through to merchants."

Some experts say that these chargebacks probably total "tens-of-millions of dollars and will likely continue to rise," and probably are "far higher for big merchants."
KC's View:
It just feels like all the outrage about the banks may be reaching some sort of critical mass, and maybe it will translate into action that will be a lot fairer to retailers and consumers. It feels like it ... but I wouldn't count on it, because the financial services industry seems to write the biggest checks and fund the better lobbyists.