One Consequence of the New EMV Credit Card Technology: More Online Fraud

The new EMV credit card technology mandate which took effect this month in the United States to better protect those in-store purchases from counterfeiters may actually be leading criminals to prey more heavily on online retailers, where payment channels are less secure.

With the U.S payment card industry in the throes of the upgrade to the EMV standard (EMV stands for Europay, MasterCard, Visa, the three companies that developed the standard for the security chip), it is expected that the United States will experience a significant increase in online fraud as criminals migrate to Card-Not-Present (CNP) opportunities―a repeat of what happened after the same technology roll-out in Australia, Europe and Canada. According to leading research firm Aite Group, CNP fraud will account for about $2.9 billion in fraud losses to U.S. issuers this year. However, by 2018 when about 98 percent of payment cards in the United States will be enabled with the EMV capability, that number is expected to more than double to $6.4 billion in losses.

The shift to EMV is designed to significantly reduce in-store fraud for retailers that upgrade their payments processing systems. The new credit cards are embedded with a chip that stores the data (versus on the magnetic strip), making them extremely difficult or nearly impossible to counterfeit. This reduces point-of-sale fraud, where criminals make purchases with a fake card at a physical retail counter.

However, this does nothing to discourage fraudsters from quickly turning their attention to the “virtual” counters online. In the e-commerce world, only the card digits, expiration date and Card Verification Value (CVV) are used, so the EMV chip doesn’t provide any safeguards―making online payments easier targets.

Huge retail revenue losses due to online fraud continue to rack up year after year. During the past 10 years, the volume of global fraud losses for online payments has increased at an average rate of 10 percent annually. At the end of 2014, the global losses due to fraud were estimated to reach the astounding amount of $14 billion.

Unfortunately, criminals are always going to look for ways to siphon money from a merchant’s bottom line, so it’s important invest in fraud-prevention technologies that adapt to their evolving tactics. Retailers need to implement fraud-prevention strategies that not only stop those losses, but also do it in a cost-effective manner—managing the delicate balance between an efficient and seamless shopping experience and an accurate and secure transaction. The NetAcuity platform, a suite of IP Intelligence and geolocation solutions, is a cost-effective first step within a fraud-prevention framework and will provide retailers with the tools necessary to spot—and stop—fraud before it happens. Used in conjunction with traditional identification- and transaction-verification tools, NetAcuity will allow merchants to preserve the customer online shopping experience, reduce fraud losses and, ultimately, help increase their profitability.