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EMV cards are resulting in a 76 percent drop in card-present fraud

The new credit card liability rules that took effect four years ago to reduce payment card fraud are working as intended. Brick-and-mortar merchants that accept EMV chip cards are seeing a 76 percent drop in counterfeit payment fraud since the cards went live in late 2015, according to Visa.

EMV cards – named after Europay, MasterCard and Visa, the three credit card companies that worked together to create them – contain a tiny computer chip that merchants with chip-enabled payment terminals can read to authenticate the card and the cardholder when a PIN or signature is required. The chip can hold much more data than the magnetic stripe on the back of older cards, which were much easier for criminals to copy.

Since the new liability shift rules went into effect in October 2015, merchants that have not installed EMV card terminals have been required to cover losses and pay fines if they complete fraudulent chip card transactions using a terminal with only magnetic stripe technology.

The good news is, the number of those riskier transactions continues to shrink. For one thing, EMV card adoption by consumers is high. Between October 2015 and March 2019, the number of EMV Visa chip cards alone grew by 219 percent to 509 million. By March 2019, 99 percent of overall payment volume on U.S. purchases was tied to EMV chip cards.

Merchants have been a bit slower in making the switch. Some 3.5 million -- roughly 75 percent -- U.S. storefronts had adopted EMV card technology by March 2019. Smaller retailers have tended to lag behind, due largely to the cost of EMV chip-reading terminals and the time and training needed to implement them.

EMV paves the way for other alternatives

In addition to reducing card-present fraud, EMV chip cards are also easing the transition to other newer, faster payment options that rely on similar fraud-prevention technology.

Most EMV terminals, for example, are equipped with near field communication (NFC) technology, which enables merchants to accept contactless payments. Consumers who simply “tap” their smartphones to these EMV readers can complete transactions more quickly than with a physical card, which makes them attractive to many convenience-focused businesses.

To speed card approvals and shorten payment lines, security professionals are also exploring ways to eliminate signatures and confirm a cardholder’s identity using fingerprints, irises and other forms of biometric verification.

While EMV chip cards deliver clear benefits to businesses whose customers are present when making purchases, they don’t offer the same security protections for online, phone or other card-not-present (CNP) transactions. In fact, CNP fraud increased after the new liability rules took effect due to criminals moving their activities online.

This game of cat-and-mouse will continue as criminals develop new ways to evade today’s security protocols and the payment industry responds by introducing ever-stronger standards to thwart them.

EMV chip cards are not a cure-all, but they have proven to be highly effective. The payment evolution is ongoing. And it’s in everyone’s best interests – merchants, card companies and processors alike – to keep pace. Retailers that choose to wait are opening themselves up to alienating customers and increasing fraud risk and responsibility.

Making it safe and easy to get paid is critical to business success.

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