>>>Presently mastercard/visa/amex assume most of the liability (and they very well better for the transaction fees they charge.)
I have no idea why everybody thinks this.
I've been in the card processing business for over 15 years. I have never seen a card brand take the hit on a fraudulent charge. Its always the merchant who pays with a chargeback, unless they can absolutely prove the real cardholder made the charge. Each merchant has an acquiring bank for their card processing merchant account, and the only risk these financial institutions take is the case of card fraud with a chargeback to a merchant who has disappeared with the money.
Also, most of the fees go to the card issuer Chase or Citibank for example. They are taking the risk that a card holder will not pay. The merchant pays these fees that are generally passed on in the form of higher prices.
The reality of the liability shift is more complicated than anybody really appreciates. Whoever the weakest link in the chain is will assume the liability. If a merchant sticks with the old mag strip reader and the consumer has an EMV card, the merchant will always assume the responsibility. If a merchant accepts chip & signature when the consumer is capable of chip & pin, again the merchant will take responsibility. The banks and processors will never be the weak link in the chain because they all support the strongest forms of the new protocols.
Certain card issuers already have a large number of chip & signature cards in the field - Citibank for example. The other issuers realized that if they all issued chip & pin, grandma would just start using her old chip & signature card because she wouldn't bother to get a pin number and use it. By the new rules, merchants who can take chip & pin, but issuers only offer chip & signature are not the weak link in the chain - the card issuer will be. I am sure there will be law suits making sure the card issuers are held liable for their making the decision to being the weak link in the chain.
This is where the law of unintended consequences will rear its ugly head. With EMV, counterfeit cards go away. This means that card fraud will require a real card. Ladies & gentleman - watch your wallets and purses - those cards will be like cash to a thief. You can bet that the rules for reporting lost & stolen cards will greatly tighten, and the consumer will totally be held liable for charges made on lost & stolen cards.