Snippet: Credit and debit card fraud is top of mind for payments industry professionals worldwide. According to a report by Mercator Advisory Group released in February 2013, the direct costs of payment card fraud for US issuers reached nearly $1.4 billion in 2012, but the total costs associated with it are estimated at more than $8 billion. Other analysts suspect that this cost is significantly underestimated because fraud losses are probably underreported.

Credit and debit card fraud is top of mind for payments industry professionals worldwide. According to a report by Mercator Advisory Group released in February 2013, the direct costs of payment card fraud for US issuers reached nearly $1.4 billion in 2012, but the total costs associated with it are estimated at more than $8 billion. Other analysts suspect that this cost is significantly underestimated because fraud losses are probably underreported. When all associated costs of fraud – such as data-breach forensics, lawsuits, undetected fraud and misclassified issuer losses – are taken into consideration, losses may actually total more than $15 billion in the United States alone.

One reason for the huge growth in this kind of fraud is that criminals no longer have to steal the card itself; all they need is the information on it. And that data is relatively easy for thieves to acquire, especially from magnetic stripe cards. Card skimming or cloning gangs can illegally record card information by photocopying cards, rigging credit card readers or using specialized skimming devices. Call centers are another point of origin. But the largest supply of compromised card data comes from data breaches at merchant acquirers, healthcare providers, payment processors, and financial institutions where card information is stored. These data heists are epidemic. Close to a billion records were compromised in 2014, a record-breaking.

Hence the interest in EMV.

EMV (which stands for Europay, MasterCard, and Visa) is a globally recognized and accepted chip card technology standard. While a magnetic stripe card bears simple, unchanging strings of digits, visible to all concerned, an EMV card – also known as a chip card, smart card, or chip-and-PIN card – contains an inexpensive, tamper-proof microprocessor that brings with it the ability to authenticate the card interactively and encrypt transactional communications. This capability significantly reduces the risk that card information can be accessed, copied, manipulated, or traded by fraudsters.

Payment providers worldwide have, over the last decade, adopted EMV technology for payment cards, ATMs, and point of sale (POS) terminals, but the United States has been slow to do so. With EMV liability rules set to go into effect this year in the world’s largest economy, that is set to change.

What can the industry in the United States learn from EMV’s early adopters in other countries?

One thing is clear: EMV will sharply eradicate both counterfeit and lost or stolen card fraud in the United States, but it is not a solution for all types of card fraud. Post-EMV, fraudsters in Europe, Asia, and Africa have switched their focus to another target – card-not-present (CNP) transactions. Globally, there have been sharp increases in CNP fraud, which includes illegal transactions conducted by telephone, the Internet, or through mail order. The United States must prepare for this looming epidemic.

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Entersekt editor

Entersekt editor

An avid scowler and violent sharpener of pencils, Editor’s bark is worse than her bite. Every scrap of writing that crosses her desk she treats with the same care she would her own privately published comic verse. Any orphans and misfits, she takes under her wing. After hours, she practices amateur type design and represents her local library in extreme kerning competitions.

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