Liability shift works like this: Historically the merchant is protected if they had good faith belief that the payment card was authorised via things like a mag stripe. After liability shift that goes away unless you use EMV. You checked the card was "real" with just a mag stripe? Not interested, the chargeback comes out of your money.

Your local gas station can keep using mag stripe readers for another decade if they like. But liability shift means places that see significant fraud will have an obvious economic incentive to go EMV, and that shifts the fraud onto nearby stations that didn't have fraud problems, so they go EMV and so on.

If you're a merchant with very low fraud rates it can make sense to do no Authorization step whatsoever. Any merchant, anywhere in the world, can do Settlement, which is the step that moves money from your account to theirs, based just on the card number. Only if it becomes a question as to whether this payment was authorized does it matter whether they did the Authorization step, a mag stripe read, the old fashioned impression machines, or a chip-and-PIN terminal.

Certain types of companies can find it makes sense to do no Authorization for groups of customers. One Click may be an example of that. You did a bunch of transactions, with a physical delivery address, what are the chances that a new transaction with the same delivery address and card details is fraud while the previous ones were not?

When NFC showed up, it was intended for plastic cards. This was pretty widely deployed. Then software companies integrated it with phones. This made the telcos unhappy, because these phones had a "secure element" that they did not control (traditionally the SIM card was the secure element, but these phones ignored that and that upset them; back then, a carrier being upset meant that your phone could not be used on their network). It also made processing networks unhappy, because they saw that they were losing control. (You don't need Mastercard and Visa when the phone can just use the Internet to ask Apple to authorize the transaction, after all.) So they flat-out stopped issuing cards with NFC. Then the final blow is that merchants were tired of paying credit card transaction fees, so they removed NFC readers from their stores, and banded together to make some shitty system to bill your purchase directly to your checking account. No more paying fees or pesky chargebacks.

The retail side blew up -- no consumer wanted it, and it was technologically bad. NFC readers are back in stores. The carrier side blew up -- SIM cards are gone and Apple or Samsung is your secure element provider. I am not sure what happened on the processing card network. I'm guessing they made some private deal with the NFC payment providers (Apple, Google, Garmin, Fitbit, etc.; enough companies in on the game that they can sit back and watch them fight each other while they profit).

I kind of got to watch this from both sides. I worked on Google Wallet when I started at Google in 2012. Used it pretty much every time I went to CVS. Then CVS removed their readers. Then Apple entered the market, and CVS once again accepts NFC cards.

So maybe gas pumps played a role; I don't drive so I don't interact with gas pumps ever. But there were much deeper problems. A lot of entrenched monopolies stood to lose a lot, so they were happy to impede progress wherever possible. There was never a good possible outcome, though -- let the incumbents keep their power, or let the upstart megacorps become the new incumbent. Plenty of VC money available if you think you can fix this problem, or become the new big guy ;)

Didn't help that thr superior user experience of NFC built into cards was drowned out by the klaxons of the media continuously warning customers of proximity theft.

Wrong threat model, the cheap mag skimmer or camera or unsecured database models were the real risks. It wasn't that someone will stand butt-to-butt with you to steal a NFC token.

You need to do a relay attack. Here's how that goes:

1. Jenny's payment card is in her jacket pocket.

2. Charlie walks into a store wearing a small NFC-capable computer and a medium distance radio (a cell phone might do) perhaps concealed inside his clothing

3. Charlie's friend Barry walks near Jenny, Barry is also wearing a similar setup to Charlie.

4. As Barry gets close to Jenny, Charlie "checks out" at the store, paying with NFC. The transaction travels from a machine near Charlie, through the radio, to Barry (now creepily close to Jenny) and then back over NFC to Jenny's card. Jenny's card agrees to the purchase - everything seems legit.

Jenny just paid for Charlie's purchases even though they've never met.

This attack isn't economically attractive because transaction sizes are limited. A complicated trick that sometimes allows you to get "free" pizza or coffee in exchange for risking time behind bars seems like a bad idea. If you could get a laptop, or a big TV then it might be more attractive, but you can't because those cost too much to allow mere NFC presence authorization.

First, it does not mean that you're getting any money. Such a charge is effectively "sending an invoice" to the issuing bank from the store which is supposed to have that terminal, and they will pay your merchant bank, which will give money to the institution who got issued that terminal. There's no way for the store clerk personally or someone else to get to these funds.

Second, the money is not coming today. You get an authorization message, but you'll receive the actual money later.. if ever. If the payment is disputed, you won't get that money. If it's disputed a month later, they'll take that money back from you. If many of your payments are disputed, then all your incoming funds will be frozen until they verify if all of them should be returned. If multiple payments are disputed, then the standard methods of tracing 'common point of purchase' will reveal the particular terminal as the culprit. Also, malicious merchants is a known threat, so the merchant bank will ensure that you can't just spam a day's worth of fraudulent purchases and run - standard terms will expect that some amount of money is frozen (e.g. rolling 15 days worth of transactions) so if you suddenly get a bunch of chargebacks, the customers will be paid back in full. Fake stores and shell companies are a thing, but there are reasonably effective measures to try and prevent that.

So there's no threat through collusion from a store employee - the fraudsters would get identified and would not get any money at all; and there's limited threat from collusion with a whole merchant - the fraudsters would get identified and can't get any meaningful amount of money. Extracting a couple hundred dollars could probably work - but you're "burning" the identities of multiple people and a company; the bank will 'eat' that loss if you succeed, but you can't repeat this trick.

An employee? Or the store owner?

These terminals don't offer a choice of destination bank account, if you type $16.94 into Walmart terminal and hold it near Jenny's card the card will authorize $16.94 payment... to Walmart.

For an independent merchant (including e.g. franchise operators) in some sense that's their money in the merchant account, so it makes a little bit more sense, but I still don't think it really adds up. It's like opening a bar so you can get cheap booze, the economics don't make sense.

There are opportunities for insider crooks. In the UK for example there were a rash of what are morally skimmers built into chip card terminals. Here's how that worked:

You own one or more stores with shiny new EMV payment terminals. From an instructional video you learn how to prise open a common model of terminal without setting off its tamper detection. Then you use the huge space inside the terminal left for an optional security feature (never implemented because features costs money) to add a board that taps the communication to the card and uses a cell phone connection to upload it. You seal up the tampered terminal and install it at one of your busier stores.

Customer puts their chip card in, the terminal works as expected but unknown to them your modification stores the card details and transmits them to other crooks half way around the world.

The other crooks are making old-fashioned magnetic stripe cards with details that have been uploaded. They send small fry out with these bogus cards to buy stuff in a country that doesn't have EMV yet. The stuff is fenced, and you, back in the country with EMV, get say 10% of the proceeds for your contribution to this international crime.

Some people in the UK got prison time for this. International card fraud is easier to spot (this person bought groceries just outside Luton, then forty minutes later they bought a laptop computer in Hyderabad or Houston?) but until EMV is rolled out everywhere similar tricks will be done.

At the same time fees could be raised 2% for non-chip transactions to incentivize upgrades.

https://www.latimes.com/business/technology/story/2020-01-07...

I don't see a bank replacing its customers' forms of payment with a new form that isn't accepted in as many places as the old one.

Shops accepting mag stripe payments are liable for counterfeit fraud. If you use EMV (chip cards), then card brands protect you (Visa, MasterCard, etc.

You can Google it as "EMV liability shift" if you're interested in more details.

Exxon (pre-ExxonMobil) had chip-enabled pumps in the early 90's. Instead of a card, you had a little cylinder-shaped keyfob about the size of a few Tylenols strung together. I'm not sure what happened to that, I ended up moving out of an area served by Exxon.

These days I see gas pumps with the little wireless payment logo, and I have a card with the same logo, but it's never worked for me.