Image by Kelly Sikkema

What is the "Liability Shift"?

In 2015, Visa/MasterCard required merchants to begin accepting chip cards. If they don't, they now incur the liability from fraudulent sales. 

For decades, credit card fraud liability fell to the issuing banks. What this means is that if a fraudster stole a card and used it to buy a new set of tires, the card-issuing bank would be responsible for the losses. They'd put the money back in the customer's account, and they'd pay the tire shop back for the cost of the sale. The issuing bank was wholly responsible for credit card fraud (in most circumstances) - they "held the liability" for fraudulent sales.

In 2015, this changed. To encourage the use of chip cards, the card associations  changed how the rules worked. They now stated that if a merchant swipes the card when they could have used a chip, it's the merchant who's responsible for the fraud! Clearly, this rule change had intent behind it. The card associations wanted  merchants to upgrade their equipment to allow for new chip cards. So, they punished merchants who don't upgrade by placing liability for fraudulent sales on the merchant.

In a way, this makes sense - if a merchant chooses to utilize old, non-secure technology, then they can also choose to incur the liability of potential fraud. In 2015, this was a big deal - but today, since most merchants have newer equipment, it's become more of a moot point. As long as you accept chip cards, you incur no extra liability, just like the old days.

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