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Canada: Chip-Enabled Merchants Experience Fewer Chargebacks

New findings announced by Moneris Solutions, Canada's largest payment processor, reveal that "merchants who process chip card transactions are experiencing fewer chargebacks than ever before due to increased security and fraud detection. This is the first data of its kind from Canada and demonstrates that chip cards reduce fraud and chargebacks."

The data addresses the chargeback concerns of merchants especially during the busy holiday season. The migration to chip cards provides peace of mind to merchants and consumers alike who have all been highly inconvenienced in the past by credit card fraud.

"Not only does the data illustrate the importance of chip cards to merchants but it shows their tremendous value to everyone along the payment value chain, including cardholders," said Santo Ligotti, Director, Marketing and Communications at Moneris Solutions. "As we head into the hectic holiday season, we expect to see a major migration to chip technology. Early adopters understand how chip card processing can significantly reduce chargebacks and enable more secure transactions."

Chip technology provides merchants and cardholders with increased protection against fraudulent transactions, which should result in fewer chargebacks for fraud. According to the findings, merchants who processed greater than 40 per cent of total transactions using chip technology experience on average, up to four times fewer chargebacks than those who processed less than 40 per cent of total transactions using chip technology. Retailers reported 2.9 times fewer chargebacks while restaurants reported 1.8 times fewer chargebacks, making a solid case for chip card acceptance using pay-at-table technology. The data revealed that one-third of overall transaction volume is currently processed using chip cards.

"This compelling data proves the effectiveness of chip cards and substantiates the introduction of chip cards into the Canadian marketplace," said Mr. Ligotti. "Clearly, the financial investment made by merchants and processors is paying off."

Moneris Solutions compiled the findings after examining the data of 21,000 merchants with 40 to 95 per cent of total transactions processed using chip technology in September 2009 and their recent chargeback activity. Gasoline merchants were excluded from the survey as they traditionally experience a consistently low number of chargebacks.

Preventing fraud is the main driver behind chip migration in Canada. In 2006, counterfeit fraud in Canada on debit and credit totalled almost $250 million and has been growing at almost 25% annually. In response, Europay MasterCard and VISA created a standard called EMV, developed by, adopted by card issuers for chip-based debit and credit cards. In a chip card (also known as a smart card), a small microchip is embedded on the front of the payment card to securely store payment application information such as the cardholder's account number. Chip cards and chip terminals work together to ensure a highly secure transaction by validating the card and the cardholder via a personal identification number (PIN). The computer chip makes cards more difficult to copy, reducing counterfeit fraud.

Card brands have all committed to migrating to chip-based credit cards by late 2010. The majority of point-of-sale terminals and credit and debit cards are expected to be chip- and PIN-enabled by the same time. There are more than 440 million chip cards and 6.3 million chip-capable terminals deployed worldwide.

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