Since the introduction of the new chip-enabled debit and credit cards, many consumers have expected to pay for purchases by inserting the chip into a card reader. While several merchants do have chip readers installed, many still ask consumers to swipe their card's magnetic strip. This is because every card reader system must be approved by a credit card company, and a large number of them have not. Estimates show that there are currently five million chip readers installed in retail outlets across the U.S., but only around one million have been approved and activated. Since the magnetic strip is less secure than chips, transactions paid in this method are more open to fraudulent transactions.
The card reader approval process is determined by each credit card company and some have been much slower to approve readers. This has left many merchants, especially grocery stores, accountable for fraudulent transactions. As of 1 October 2015, the cost of fraudulent transactions has fallen on the merchant rather than the card issuer, leaving merchants responsible for billions in fraudulent charges. This presents problems for many retailers who have now been faced with a much higher number of chargebacks.
National Grocers Association President Peter Larkin issued a letter to MasterCard and Visa in which he called the lack of approval and the huge amount of money companies are now paying out to be "mistreatment." With the cost of fraudulent charges now on the merchant, overheads have increased. That, plus the cost of installing the chip readers, has left many feeling that card companies are penalizing them even though they have done their part in adapting to the new technology.
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