Yes! EMV Will Cause Card Fraud to Move Online.
October 2015 is going to be an important, eye-opening month for retailers. It’s the deadline for merchants to upgrade to EMV compliant card reading machines, or else they’ll be responsible for any liabilities arising from their non EMV compliant card readers. Merchants will very likely see card fraud costs skyrocket. While the industry has been keeping everyone aware of the October 1st 2015 liability shift for quite some time, there will surely be some who have procrastinated r simply don’t intent to get compliant.
Fraudsters Will Adapt
As soon as fraudsters find out which merchants are non-compliant, these merchants will be hammered by fraud! So far, banks were dealing with fraud costs, but after October 1st, it’s the non-compliant merchants’ problem. Fraud costs could get very high for such merchants. Not only will they be liable for their own lost revenues, but their chargebacks and card processing costs will also increase as their risk has increased.
In store fraud for most retailers will decrease because cards with EMV Chips are much harder to counterfeit. The PIN and Chip combo is extremely hard to beat for card present scenarios. They generate a unique token for each transaction and that makes it next to impossible to copy or counterfeit.
However, in the United States, the migration toward EMV chip cards has been split evenly between Chip and PIN and Chip and Signature cards. For banks and consumers who end up using the PIN and Signature combo, they lose that extra security that a PIN provides. Its very easy for a signature to be compromised but much more difficult for a PIN.
On a side note, there will be numerous card users who will forget their PIN. It will happen! Visa said in a recent press release that the EMV cards enable palm, voice, iris or facial biometrics. Biometrics can be easily accepted by biometric readers, encrypted, and validated either through an online database or through the chip on the card itself.
“There is increasing demand for biometrics as a more convenient and secure alternative to signatures or PINs, especially as biometrics technologies have become more reliable and available,” said Mark Nelsen, senior vice president of Risk Products and Business Intelligence, Visa Inc.
Card Fraud Will Move Online
On the other hand, online fraud will rise dramatically, as fraudsters shift their approach to exploit the weakest targets online. Online transactions only require card numbers and CVV, so Stolen card numbers are easily used for online shopping. Online retailers will need to be extra vigilant in order to spot bad transactions.
Experts have predicted massive increase in online fraud. They are confident of this because of the EMV experiences in Canada, the U.K. and Australia. These countries moved to EMV some time ago and they all saw huge increases in online fraud. Most other countries using EMV cards, also saw an increase in online fraud as the chances of EMV Card present fraud decreased.
According to the Aite Group study regarding the lessons learned from International EMV Adoption (PDF), Card Not Present (CNP) fraud increased internationally after EMV adoption!
- It increased in Canada by 100%
- It increased in the UK by 79%
- It increased in Australia by 100%
They predict CNP Fraud to increase by 106% in the US.
What Causes Online Fraud to Increase after EMV?
EMV greatly reduces the impact of in store fraud, where the card is present, as the new cards with embedded chips generate a unique token for each transaction. This suddenly makes online transactions, where only the card digits and CVV are used, a lot more attractive to fraudsters. Fraudsters will not be stopped by the PIN and Chip or PIN and Signature combo online, so they switch their tactics!
Based on a report from Javelin in December 2014, the eCommerce market is only 8.5% of total US electronic transactions. But this tiny amount accounts for a whopping 49% of all transaction fraud.
eCommerce is constantly on the rise, and the best way to combat eCommerce fraud is to put in place policies to prevent fraud well in advance. If merchants are aware of and ready for fraud, there will be less chance of fraud.
Contact Us for more information EMV Card Fraud. We can also help you with Credit Card Processing, or eChecks and ACH Transactions. Or take us up on our FREE Merchant Account Analysis offer. We’ll analyze your merchant account rates and let you know how to Save! If you are ready, you may be able to Switch and Save!