What is a liability shift?
Card payments - including those made through Apple Pay and Google Pay - can be subject to chargebacks. Because card payments carry a higher fraud risk, and because fraud isn't always something a merchant can control, the responsibility for a fraudulent chargeback doesn't always fall on you. This is called liability shift: it determines who is responsible when a fraudulent chargeback happens - you or the card issuer.
How do chargebacks work?
A chargeback starts when a customer disputes a transaction with their card issuer, such as their bank or card provider. The timeframe for disputing a transaction varies depending on the card network, dispute reason, and issuer, and may be up to 180 days. If the chargeback is upheld, the disputed amount (the entire transaction) is withdrawn from the merchant's account, plus multiple fees: a chargeback fee, scheme fee, and Mollie's fee.
However, you are not always responsible for the chargeback. This is where liability shift comes into play.
How is liability shift determined?
When liability shifts to the issuer, the issuer is responsible for eligible fraud-related chargebacks. This means you do not lose the disputed amount or pay a fee if the chargeback is accepted.
Liability shift is designed to protect you from certain types of card fraud that can happen for reasons outside your control. It applies only when specific conditions are met, so not every chargeback qualifies.
Customers can dispute card payments for several reasons. The four main chargeback categories are:
- Fraud
- Authorization
- Processing errors
- Customer disputes
Liability shift applies only when all three conditions below are met. If any condition fails, you remain liable.
- The transaction is secured by an accepted form of strong authentication.
- For card payments made directly (not via a wallet), this means authenticated using 3D Secure (3DS), where the cardholder verifies the payment via their bank’s app, a one-time passcode, or biometric confirmation.
- For payments made via wallet with Apple Pay or Google Pay, the payment must be secured with the device-based password or biometric authentication - such Face ID, Touch ID, a fingerprint scan, or the device PIN. This on-device authentication is treated by the card networks as equivalent to completing 3DS, because it confirms the person initiating the payment is the legitimate cardholder. - The chargeback is for a fraud-related reason.
- The payment was made with a supported card.
If all three conditions are met, liability for the fraud-related chargeback shifts to the card issuer.
Liability shift does not apply to chargebacks related to:
- Authorization
- Processing errors
- Customer disputes
You remain liable for these chargebacks.
What about in-person payments?
Liability shift also applies to chip payments, where the customer inserts their card into the payment terminal.
Liability shift does not apply for swipe (magnetic strip) payments (only done in the US, not in the EU).
For more information about the different types of chargebacks and how to resolve them, see How do I resolve a card chargeback?.