Blackhawk Confirms EMV Behind Some Merchants Removing High Denomination Gift Cards + Will Return

In Blackhawk’s latest earning call there was a particular interesting bit around high denomination open loop gift cards (e.g Visa/Mastercard/American Express gift cards). There is also come good news in sight. Here is the relevant section of that earning calls (courtesy of Seeking Alpha):

On slide eight, we’ve provided an update on the EMV-related impact to our Gift Card business. We have continued to dialogue regularly with our non-EMV compliant distribution partners on measures they have taken to mitigate their liability for fraudulent credit card activity in their stores. A few partners decided to take restrictive measures and a few important partners have taken increasingly restrictive measures around the sale of higher denomination open loop cards during late Q1 and into Q2.

Some EMV-impacted retailers have established lower limits on credit card purchases of gift cards or removed higher denomination products from the displays in impacted markets. We are seeing forecasted compliance dates slip at multiple retailers due to the complexities around testing and certification of their point of sale EMV upgrades, creating risks that dates could move out.

As of today, our top-25 accounts, seven, going to eight later this week are now compliant; four are tracking toward their compliance date; two have moved up their date; and 11 have moved back their date. Our updated forecast assumes some delays. We continue to actively monitor the situation, and based on the information currently provided by our partners we are estimating that stores representing approximately 95% of open loop gift TDV will become EMV-compliant by the end of September 2016.

For those not familiar in October of last year an EMV liability shift occurred. This change meant that “the party that is the cause of a chip-on-chip transaction not occurring (i.e., either the issuer or the merchant’s acquirer) will be financially liable for any resulting card-present counterfeit fraud” (Visa’s definition).

Because high value open loop gift cards are one of a fraudsters items of choice, merchants that aren’t EMV ready are choosing to remove these cards from shelves rather than accepting the risk from the liability shift. Thankfully Blackhawk expects that 95% of their open loop gift card sales stores to be EMV-compliant by September 2016, which should mean it’s easier to purchase these with credit cards again. Fingers crossed this prediction is true.

Hat tip to reader Bodiddely

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Bellevuemike
Bellevuemike (@guest_268868)
June 19, 2016 12:30

All Kroger stores in the seattle area have eliminated all visa/mc cards over $100. At least 25 mile radius. Been this way for 4 weeks.

Mike
Mike (@guest_268854)
June 19, 2016 11:14

Fingers crossed for Giant to come back!

NinjaX
NinjaX (@guest_268747)
June 18, 2016 21:50

Such a statement from BH doesnt mean jack. Dont get your hopes up. Its a “Wait and See” game. Always plan for the worst. The truth is, stupid ass fraudsters are technically “MSers” too in their own way.

Do you think the only issue is stolen CC used to buy GCs? So now EMV compliance means everything becomes OK? cmon. seriously? Thats already handled via vendors doing Cash Only or max 1 GC per day per person. The true issue is compromised GCs from the backend. Open loop or not. All serial numbers are sequential and algorithms are used to guess all the needed GC info.

GCs in general need to be implemented in a different way. Holding these GCs are never safe. Never give them as a gift. Most likely drained by then.

Dukie02
Dukie02 (@guest_268683)
June 18, 2016 16:24

Do you foresee a time when merchants will not want to take debit gift cards because these aren’t chip-enabled? I would think stores face the same liability when accepting VGCs without a chip now (if they haven’t implemented chip readers yet).

Russ
Russ (@guest_268729)
June 18, 2016 20:51

@Dukie02 – the cost of fraud is borne by the party with the “lowest” technology. As long as the merchant has a chip reader, they don’t care if you have a non-chip card as the cost is on the card provider, not them.

John
John (@guest_268657)
June 18, 2016 13:35

Great news if there was still a 5% card alive.

David
David (@guest_268654)
June 18, 2016 13:21

The title of your post is more hopeful than the language of the text. The transcript forecasts merchant compliance and what non-compliant merchants have done to mitigate liability in the meantime. There’s nothing in the text that implies that high value open loop gift cards will return to these merchants’ shelves.

Meh.

PS
PS (@guest_268859)
June 19, 2016 11:48

Except you are ignoring that fact that the stores LOSE money on the $500 load cards.

Stores that have canned variables will likely not resurrect them. Maybe they’ll bring back the $200’s that are profitable to them and almost useless to us.

David
David (@guest_268860)
June 19, 2016 11:50

Yes you’re free to assume that. But the transcript encourages nothing of the sort.

David
David (@guest_269031)
June 20, 2016 06:27

Respectfully, Will, this isn’t a matter of opinion. Even if they come back this transcript would have had nothing to do with it.

Yes, common sense tells us that once all merchants become EMV compliant they’ll feel comfortable selling high value gc’s again. This prediction is *consistent* with the transcript, but it’s neither promised nor implied in the text.

You’re finding good news where there are none.

Steve
Steve (@guest_268937)
June 19, 2016 18:49

It at least sounds like Blackhawk is on our side. When the stores stop selling high value cards, that hurts Blackhawk’s business, so Blackhawk will try to encourage the stores to bring back the high value cards.

Jon
Jon (@guest_268651)
June 18, 2016 13:03

Albertsons’s became EMV compliant a while back, but they still have not replaced any of the $500 VGC’s. So, this doesn’t really mean the gc’s will return at all once other stores are compliant, as Albertson’s is not putting the cards back out.

Russ
Russ (@guest_268730)
June 18, 2016 20:52

@Jon – there’s a good chance Blackhawk will push to get them put back out and ease up on the $200 cap at Albertson’s and subsidiaries once all locations are emv compliant.

DIMT
DIMT (@guest_268759)
June 18, 2016 22:38

This is likely correct, multiple Albertson’s in Phoenix still have not activated the EMV functionality of their machines.

Ben
Ben (@guest_268646)
June 18, 2016 12:36

Is this why reloadit cards cannot be bought with credit cards now? If yes, let us hope this will be resolved soon.

JP
JP (@guest_268641)
June 18, 2016 12:19

For me the issue is there are cards high value prepaid cards are easily available but they don’t take CC at all. will this change ease address that issue?

Credit
Credit (@guest_268626)
June 18, 2016 10:52

Which retailers are already emv compliant?

Dan
Dan (@guest_268628)
June 18, 2016 11:08

Any store that forces you to insert a card if it has EMV chip.