Visa Chargeback Reason Code 10.2: EMV Liability Shift Non-Counterfeit Fraud

What is Visa Chargeback Reason Code 10.2?

This chargeback reason code covers fraud-related chargebacks where the cardholder denies authorizing a transaction you processed. The cardholder contacted their bank and disputed the transaction, resulting in the chargeback. As seen subsequently, this case could be due to actual or friendly fraud.

Transactions that lead to this chargeback are card-present payments involving a chip-and-pin card. That rules out internet, phone, or mail orders where the card is absent. While actual fraud is one of the causes, an underlying facilitator could be an outdated terminal.

Let’s assume a customer makes a physical purchase in your store and uses a chip-and-pin card at checkout. However, for some reason, the payment is processed without complete authorization, like entering a PIN. That will cause the issuer to file the chargeback under this reason code, but there is more.

The EMV liability shift in the code description means you will be liable for chargebacks under this code. That will happen if you fail to upgrade your payment terminals to be EMV-enabled, thereby enjoying its protection.

The EMV chip standard does the following:

• It detects counterfeit cards
• Adds more robust verification methods like PIN

These prevent and deter fraudsters from using stolen cards. So, not using this technology leaves you open to receiving chargebacks under this reason code. The narrative will be that you processed a payment involving a stolen card on a terminal without EMV chip capability.

Ideally, upgrading to an EMV-enabled terminal should prevent chargebacks under this code. However, other things can cause it, as we’ll see subsequently. We’ve provided ways to fight it effectively.

Why Did It Happen?

This chargeback occurs primarily when a cardholder denies authorizing or participating in a card-present transaction. However, there are other conditions that must be fulfilled before the issuer can file the chargeback. We want to list these reasons to help you identify possible causes and prevent chargebacks in the future.

This chargeback will be valid when the following conditions occur:

• Stolen or lost card: The payment was made in a card-present environment, but the cardholder had previously reported the card lost or stolen.
• No chip-reading device: The transaction occurred at a terminal without a chip-reading device. It can also mean the buyer asked for the card to be entered manually instead of chip-read. An example is a customer opting to swipe the card or asking you to enter the details manually and process payment.
• EMV PIN non-compliance: This condition is for PIN-preferring cards used to initiate a transaction at a chip-reading device that is EMV PIN non-compliant.
• Online authorization: The transaction began as chip-initiated but was authorized online without an online PIN. Also, Visa did not receive the complete chip data in the authorization request from the processor.

Any transaction on PIN-preferring cards where the chips were not scanned or transmitted accordingly is susceptible to this chargeback. Actual fraud is often the cause, where the fraudster steals or finds the lost card. A fraudster would prefer not to scan the chip, instead opting for swiping or manual entry.

Using non-EMV-compliant terminals may also expose you to friendly fraud. Cardholders may take advantage and file a dispute.

EMV Liability Shift

You can receive a chargeback under this reason code if a transaction qualifies under the EMV liability shift. That means you did not comply adequately with regulations, including using fraud-prevention tools. The liability for the chargeback will shift to you instead of the issuer.

This condition holds for both actual and friendly fraud. That is why we encourage switching to EMV-enabled terminals and using fraud-prevention tools.

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How to Fight Visa Chargeback Reason Code 10.2: EMV Liability Shift Non-Counterfeit Fraud

We recommend disputing this chargeback as soon as you receive it, as you have 30 days to respond. Your approach depends on the underlying cause.

With that in mind, here are our suggested ways to fight this chargeback:

• You used an EMV PIN-compliant terminal: Provide documents that support or show that the transaction occurred at an EMV PIN-compliant terminal and was processed correctly. The card’s application transaction counter (ATC), amount transacted, currency, country code, etc., should be in the documents.
• Credit or reversal already processed: Sometimes, the error could be from your end, and you found out on time and processed a credit or reversal. You shouldn’t receive a chargeback anymore, but if you do, use this approach. Provide documents that show your credit or reversal (the amount and date of the transaction should be included).
• Dispute withdrawal: If the cardholder realizes the mistake on their end and withdraws the dispute, use this approach. Submit documents that show the cardholder’s withdrawal request. Letters and emails are popularly used as proof.

If none of these apply, you can accept the chargeback and take steps to prevent it.

How to Prevent Visa Chargeback Reason Code 10.2 EMV Liability Shift Non-Counterfeit Fraud

Incurring chargebacks under this reason code boils down to the following:

• Processing payment for a PIN-preferring chip card at a non-EMV terminal
• Initiating a chip transaction without the full chip data.

Hence, our recommended prevention tips wrap around these. Adhere to best practices in the industry. Nevertheless, look out for cases of friendly fraud, which may still occur even after taking preventive measures.

Do the following to prevent this chargeback:

• Upgrade your payment terminals to EMV PIN-compliant ones. This should eliminate processing a PIN-referring chip card at a non-EMV terminal and risking a chargeback.
• Follow Visa’s best practices when processing EMV chip card transactions. Don’t force payment when it's declined. Instead, ask for an alternative payment method.
• Obtain adequate authorization from the cardholder through the correct Cardholder Verification Method (CVM). This could be a request for a signature or PIN. Do this on every card-present transaction.
• Ensure you have an imprint for every card-present transaction. You can obtain it electronically or manually.
• Perform regular checks on your payment processing systems to ensure they work correctly.
• Ensure you submit complete chip data in the authorization request.
• Train your staff on how to handle declined chip transactions.
• Avoid swiping or entering chip cards manually when processing payments.

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