Card present counterfeit payment fraud at chip-enabled merchants dropped 80%, since the U.S. payment industry shifted to these types of cards.
In 2011, Visa led the industry by moving to EMV (Europay, MasterCard, and Visa) chip cards. Four years later, widespread adoption of chip technology occurred because it was known to be effective at reducing counterfeit fraud in other countries.
Visa’s latest numbers prove they are working. It saw the sharp decline in counterfeit fraud, during the most recent period ending in December 2018. At the same time, it saw growth in the number of chip cards and chip-enabled merchants, payment and transaction volume since before the shift to EMV chip cards.
Why Chip Cards Work
First, they are very difficult to clone. The credit cards that were rolled out in the 1980s only contained magnetic strips, which were used for swiping. When a card was swiped, the payment processor read its magnetic field and checked it against the bank account. These were less secure because the card data remained static, making it easier for fraudsters to steal the information and put it on a new card.
On chip cards, the data is always changing, so it is very difficult for a fraudster to isolate and extract the information. To steal this type of data, a person would need to get into the circuit of the physical chip and manipulate it to get the cardholder’s bank information. Obviously, this is not only very difficult, but this type of high-tech data surgery requires high skill levels and expensive equipment. So, it’s not like it is impossible but it takes a lot more skill and sophistication to pull this off kind of fraud.
Also, the encryption of chip and PIN credit cards are more complex. When magnetic-strip cards are used, the bank information travels without encryption. On the other hand, chip cards have state-of-the-art encryption build directly into the chip. So, when a chip card is inserted, the card and the terminal used to make the payment use a special type of code or language to transmit messages between each other. Therefore, it is more difficult for that information to be stolen.
The Final Word
Chip technology helps fight counterfeit fraud, and as a plus, that same security technology is also available in contactless payment cards. This means consumers get the ease of quick, convenient tap transactions with the same level of protection against fraud. It’s a win-win situation.
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