Understanding Visa Chargeback Reason Code 10.1: EMV Liability Shift Counterfeit Fraud
Visa Chargeback Reason Code 10.1 applies when a card-present purchase is later disputed as unauthorised, and the card used turns out to be counterfeit. If the payment was processed using a non-EMV terminal, liability shifts from the issuer to the merchant, who will be required to pay the refund. Knowing what Reason Code 10.1 means, how to respond, and how to prevent repeat cases helps you to protect revenue.
Understanding Visa Chargeback Reason Code 10.1: EMV Liability Shift Counterfeit Fraud
Visa Chargeback Reason Code 10.1 applies when a card-present purchase is later disputed as unauthorised, and the card used turns out to be counterfeit. If the payment was processed using a non-EMV terminal, liability shifts from the issuer to the merchant, who will be required to pay the refund. Knowing what Reason Code 10.1 means, how to respond, and how to prevent repeat cases helps you to protect revenue.
Key Takeaways
What it means: A counterfeit chip card was used at a point-of-sale device that did not complete an EMV chip read, moving liability to the merchant.
Causes: Non-EMV terminals. Staff bypassing chip entry. Incomplete chip data in the authorisation request
How to respond: Show the transaction was chip-read, prove a refund was already issued, or prove the cardholder withdrew the dispute.
How to prevent: Adopt EMV-compliant hardware. Collect the right Cardholder Verification Method. Train staff on chip-first processing.
What is a Visa Reason Code 10.1 Chargeback?
A 10.1 chargeback signals that the issuer believes a counterfeit card was used for an in-store transaction. “EMV Liability Shift" refers to Visa’s rule that merchants who rely on magnetic stripe or manual entry accept liability if fraud occurs. This type of chargeback was introduced to speed up the rollout of safer EMV equipment and reduce magnetic-stripe cloning.
What this means in practice is that the issuer refunds its customer and debits the merchant’s acquirer. The acquirer then deducts the funds from the merchant account. If the terminal is EMV-enabled and follows chip rules, the issuer retains liability. If not, the merchant is liable to cover any refund.
Primary Causes for a Code 10.1 Chargeback
Most 10.1 disputes can be traced back to gaps in chip processing. A common trigger is a sale completed on a terminal that cannot read EMV chips, even though the card carried one. A second cause is staff swiping or keying a chip card because the slot was jammed, the customer was in a hurry, or the queue was growing.
Even when a chip read is attempted, submitting an authorisation request without the full chip data can still shift liability. This is because the issuer loses the chance to run its own anti-counterfeit tests. Counterfeiters may tamper with chip readers or persuade staff to override errors. This produces a transaction that may look legitimate but fails authentication.
Time Limit for Disputing a Visa Reason Code 10.1 Chargeback
Visa sets separate time periods for issuers and merchants to dispute this type of chargeback. Issuers normally have 120 calendar days from the transaction date to begin a 10.1 dispute. Once the issuer alerts the merchant, the merchant typically has only 30 days to respond with compelling evidence. Missing that deadline usually means automatic loss of the case and the funds.
Acquirers need time to vet documents before forwarding them to Visa. Merchants should therefore aim to submit their response, including all evidence, within 20 days. Keeping signed receipts, terminal logs, and chip-read proof organised allows for timely responses. This reduces the risk of default losses and keeps dispute ratios below monitoring thresholds.
What 10.1 Means for Consumers & Issuers
For cardholders, 10.1 provides a safety net. If their card data is cloned and used in-store, they can contact the issuer and, after a quick claim, receive provisional credit. Issuers must decide whether the merchant or the issuer bears liability. If the authorisation record shows a proper chip read, the issuer absorbs the loss. Otherwise, the issuer can pass the cost to the merchant.
This model encourages banks to promote EMV cards to their customers and educate them on the benefits of chip-first usage. It creates a cleaner data stream for fraud analysis and helps fine-tune authorisation and risk systems.
What 10.1 Means for Merchants
For a merchant, every 10.1 dispute represents an immediate revenue reversal plus additional fees. Too many of these cases can lead the business to be included in the Visa Fraud Monitoring Program. This brings higher processing costs and stricter oversight. Beyond the financial hit, 10.1 disputes expose operational weaknesses. This could be outdated POS equipment, gaps in staff training, or failures in authorisation routing.
Merchants that modernise hardware and enforce chip policies see chargeback volumes fall sharply. Issuing banks and acquirers regard such merchants as lower risk. In return, they will often offer them better processing rates. Staying below programme thresholds preserves cash flow and keeps the payment partnership healthy.
How to Respond to a Code 10.1 Chargeback
The response starts with deciding whether to contest or accept liability. Merchants should fight 10.1 only when they have solid evidence.
First, retrieve the transaction log to confirm a chip read took place. If a chip read did take place, include relevant evidence in the response. This includes the Terminal Verification Results, Application Cryptogram, and authorisation approval code. Attach the signed receipt or PIN verification record. This provides evidence that the correct verification method was used.
If a refund or credit was already processed, include the refund transaction details and date. This can help to prevent double reimbursement. Finally, if the cardholder has sent an email or letter withdrawing the complaint, add that correspondence. Submit the full packet within the acquirer’s deadline.
If evidence of chip processing is missing, accepting the chargeback saves time and avoids extra dispute fees. However, it's important to review your internal processes to prevent future occurrences.
Proactive Prevention: The Ultimate Defence
Adopting certified EMV terminals across every checkout lane is the single most effective step. Add strict chip-first rules, so staff never swipe or key a chip card unless the terminal flags the chip as unreadable. Regularly test terminals, keep software up to date, and store logs for quick retrieval. Teach staff to request a different card if a chip read fails, rather than forcing a swipe. To cut future losses, try out chargeback alerts, which provide instant notice when a 10.1 claim appears.
