Wednesday, June 24, 2015

Oct 1 EMV Credit Card Switch - More Deflation Evidence

For the last 40 years, the banks could book the profits and socialize the losses of credit card fraud for the simple reason the credit was mal-credit, that is it cost them nothing.  Since they made the credit out of thin air, they actually lost nothing to fraud.  The banks simply kept creating more credit to cover their losses, and prices went up to pass the losses onto the consumer.  How much fraud occurred meant nothing to the banks, we consumers would ultimately cover it with higher prices when next we shopped.

We now have hyperinflation in mal-credit where those who qualify for credit either don't want it or use bene-credit, and those who do not qualify, overrated borrowers like students, home and car buyers and corporations are snapping it up for those purposes.  (Home buyers are a special case, they are secondary, with real incomes but based on the false economy, in any case paying waaaay to much.)

So knowing full well a bust is coming, and no longer able to pass on the losses through mal-credit inflation, the banks have come up with a change that suits them in a delflationary economy;

Credit card fraud is the merchants problem, not the banks, unless you upgrade to new technology:
Right now, if you process a fraudulent card, the card issuer absorbs the cost, whether it be Bank of America, Chase, Capital One, etc. After the “liability shift” hits, if someone pays with a fraudulent chip card and you haven’t upgraded to an EMV reader yet, the liability falls on you. The card issuer is off the hook.
Of course the switch is voluntary, so who cares?  Well, voluntary for now, as always (but recall the new risk).  But wait, 
Moreover, U.S. banks and card companies will not issue personal identification numbers (PINs) with the new credit cards, an additional security measure that would render stolen or lost cards virtually useless when making in-person purchases at a retail outlet. Instead, they will stick with the present system of requiring signatures.
So we are going to a system, and putting in that real cost to retailers, and mal-credit funded to bankers for a system that does not work?  Sounds about right...

The liability issue has engendered anger on the part of some retailers, but it has also provided an incentive for compliance with the new standards.
"When banks and card companies are only concerned about shifting the liability to the retailer, you have to comply first," Brooks Brothers Chief Executive Officer Claudio Del Vecchio said. "And then think of solutions that will fix your problems."

As to small business,

Anne Manion, owner of the women's clothing and accessories boutique Girl Hour said she doesn't think small businesses are as exposed to data breaches as large retailers are, but she is still thinking about reaching out to her bank about upgrading terminals at two of her stores.
"The cost implications are important and I'm going to wait and see if by the end of the year there is a way to rent these terminals instead of buying them," she said. Manion already pays a $500 fee every month for the two card terminals she now has.

I've had a merchant account with Wells Fargo for over a decade associated with my online business, feeding the beast.  Today I stop accepting credit cards, you can create a PO, have me bill you, or mail me a check.  In a year I'll report the resulting differences

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