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Written by Cyndie Martini
on June 07, 2016

EMV technology is designed to reduce point-of-sale fraud. The shift that took place in the U.S. last year urged merchants, credit unions, banks and other credit card issuers to adopt the technology to help keep members and consumers safe.

In this capacity, the shift has been beneficial. According to a study from Aite Group, a research firm that focuses on business, technology and regulatory issues, financial institutions that reissued at least 50 percent of their portfolio saw total counterfeit fraud decrease an average of 25 percent. One bank that reissued 100 percent of its portfolio expects fraud to be down 80 percent by the end of the year.

Unfortunately, there are many more fraud types than the kind that happens at a payment terminal. Aite pointed out that fraudsters are not apt to finding legitimate jobs, but instead to finding more lucrative means of thievery like card-not-present and account takeover fraud.

A glimpse into the future

The U.S. isn't the first country to implement EMV cards, and data from countries like the U.K., Australia and Canada shows that during the period of time when consumers and merchants make the transition from magnetic stripe to the chip, these alternative methods of fraud skyrocketed.

"It all went up as the counterfeit opportunity went away," said Julie Conroy, a research director at Aite, according to CNBC. "It's a bit of an arms race between the good guys and bad guys and there are lots of technologies that can help with this, but those companies that don't deploy will be the weakest link."

In February 2006, the U.K. implemented the same liability shift that the U.S. did last year. Aite explained that in the years following, CNP fraud rapidly increased from £183 in 2005 to £328 in 2008. The next three years saw welcomed declines, but CNP fraud began to rise again beginning in 2012 and reached a high point last year with a total of £398​. This increase could be attributed to several causes, including criminals who have adapted their methodology as well as the rise of e-commerce.

The U.K. also saw increased ATO fraud following its EMV shift, from £42 million in 2005 to £125 million a decade later. This is generally performed through stolen credentials and personally identifiable information used to take over existing accounts or create new ones.

This information is a good indication that increased CNP and ATO fraud are likely in the future for the U.S. Plus, as Conroy pointed out, there remain plenty of chances for criminals who prefer point-of-sales fraud to continue this method for the time being. Only about 20 percent of credit card transactions and 10 percent of debit card transactions have been made using EMV as of March 2016.

Compare and contrast

While there are plenty of comparisons one can draw between the ongoing migration period in the U.S. and that of the U.K. a decade ago, some industry experts have pointed out that there are significant differences as well. Al Pascual, research director and head of fraud and security at Javelin Strategy & Research, pointed out to Digital Transactions that today, millions of consumers are actively applying for accounts online. This makes PII and other crucial information more easily accessible for fraudsters.

"We know, based on what's happened in other markets, that account takeover and application fraud will grow on consumer accounts," Pascual explained.

A report from Javelin predicted that new account and ATO fraud will probably increase 60 percent by 2018, totaling almost $8 billion in losses.

Aite suggests that credit unions that don't expect to have upgraded cards to all members by the end of this year to do their best to set a goal of getting the upgraded cards to their members as quickly as possible. Bolstering member education is also pertinent. In this new payments landscape with changing threats, it's important for credit unions and other card issuers, along with merchants, to do their best to get ahead of criminals to protect their members and customers.


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