As of December 2018, more than 3.1 million merchant locations accepted EMV (Europay, MasterCard, and Visa) chip cards, according to Visa. This is a 692% increase since the beginning of EMV migration in 2015.
As of the end of last year, there were 511.1 million EMV chip cards in circulation in the United States, which is a 221% increase since 2015.
Both merchants and cardholders have fully embraced EMV chip cards, and their use is expected to continue to grow in the nation. All parties are recognizing that chip cards thwart fraud for in-person transactions. However, as merchants bear more of the cost for fraudulent transactions, better steps need to be taken to address a rise in online fraud despite the use of EMV cards.
EMV Chip Cards Provide Added Security
The card schemes began transitioning from magnetic stripe cards, which were highly vulnerable to counterfeit fraud, to EMV chip cards in 2015. EMV transactions are safer because they use cryptograms that are unique to each transaction. This also makes them very difficult to fake. Risks of fraud are also reduced due to the extra added levels of security in the cards, making them less valuable and desirable to fraudsters.
Numbers Show EMV Helping Combat Point-of-Sale Fraud
Merchants who have adopted chip technology experienced an 80% decrease in counterfeit fraud dollars between September 2015 and September 2018.
To date, there has not only been a spike (71%) in the number of Visa EMV debit and credit cards, but the number of transactions on these cards also are up. In December, EMV cards were used for about 98% of overall U.S. payment volume.
A Major Move in Liability
The tide turned toward EMV conversion in October 2015 when the card networks ordered that retailers accept chip cards or face increased liability if a card was fraudulently used at in-person point-of-sale terminals that couldn’t accept chip cards.
The goal of the cards was to mitigate payment card fraud, with the card schemes noting that embedded microchip cards were safer than the magnetic card stripes that were created in the 1960s.
During the magnetic stripe era, banks absorbed the fraud costs for counterfeit transactions while merchants had to pay for those committed due to lost and stolen cards.
With the implementation of EMV rules, retailers are responsible for fraud by lost and stolen cards, as well as counterfeit transactions made on terminals not equipped to accept chip cards.
A federal reserve study released in October 2018 showed that in-person had dropped, but the EMV had also triggered more online cases of fraud. Between 2015 and 2016, face-to-face fraud fell by $800,000 to $2.9 billion. During that same period, fraud from contactless transactions spiked up by $1.2 billion to $4.6 billion.
What to Expect in the Future
With the looming threat of fraudulent mobile and online transactions, retailers believe the card schemes need a stronger authentication system. For example, merchants think that adding a PIN requirement for credit cards, like those used on debit cards, would help fight counterfeit transactions.
Other say biometrics will be the technology that takes transaction authentication to the next level. Biometrics is when identifiers, such as fingerprints, facial patterns, and voice cadence, are used to verify a transaction.
Biometrics presents new opportunities to increase security, meet stronger identity authentication, and enhance the convenience of payments. The mainstream use of biometrics is in the early stages of development, but with the growing interest and usage will bring about more advances. It will be used for authorization, customization, and engagement, as well as security.
Merchants, card schemes, and the payment industry will need to continue pushing for ways to fight fraud. EMV cards are a start, not the answer.
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