EMV chips and fraud:
The half-full and
the half-empty

glass-1502746_1280To an extent, whether the EMV chip migration glass is half-full or half-empty depends on how you want to look at it.

The glass is half-full

EMV chips are taking hold, now gracing 47 percent of issued Visa cards. An announcement from Visa reports:

More than 1.7 million merchants representing more than a third of storefronts are now accepting chip cards; 388 million Visa chip cards have been issued in the U.S., and we are already seeing a 43 percent reduction of counterfeit fraud at chip-enabled merchants.

The increase certainly ties to the fact that consumer trust of EMV cards is up. Business Insider reports a Visa survey showing that the percent of consumers who view chip cards as the safest way to pay has reached 35 percent.

Consumers who view the chips as safe have a point. Though nothing is foolproof, EMV cards have a track record of reducing credit card fraud. As ComputerWorld opined, “EMV, executed properly, should pretty much block all cloned cards.” Gemalto reports that in the year following EMV card introduction, overall card fraud dropped by one-third in the UK and by 73 percent in Canada. In France, counterfeit card fraud drop by 91 percent and card theft fraud by 98 percent.

Not a bad start. But then …

The glass is half-empty

Trouble is, to say that 47 percent of issued cards have an EMV chip is to say that 53 percent do not. And if 38 percent of US storefront merchants accept EMV cards, then 62 percent do not. Which means that when any of the 47 percent of EMV chip cardholders visit any of the 62 percent of merchants using only swipe technology, their cards might as well be chipless.

And now, due to challenges peculiar to the fuel industry, Visa and MasterCard will allow filling stations to join the EMV party later than originally planned. Three years later, to be specific. Visa announced the delay last month:

Given our discussions with merchants, clients and partners, Visa has decided to delay the U.S. domestic AFD EMV activation date from October 1, 2017 to October 1, 2020.

To that, the above-referenced Computerworld article ruefully commented, “This accomplishes little beyond painting a red bulls-eye on gas stations everywhere.”

EMV chip cards are driving down card fraud and, as migration progresses, promise to all but eliminate it. But even that half-full glass has its half-empty complement: Making card fraud inconvenient is driving an increasing number of fraudsters online. According to SatPRNews, cross-border online transactions are particularly at risk. As I observed in an earlier post, financial fraud is an arms race. In an article for PaymentsSource.com, Simility CEO Rahul Pangam offers recommendations to processors, online marketplaces, and financial institutions, which you can read by clicking here.

So it looks like in 2017 we’ll see card fraud decrease and efforts at online fraud increase. Whether the glass you raised on New Year’s Eve was half-full or half-empty, Happy New Year.

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