24 Months After the EMV Deadline: Are Fraudsters Flocking to Online?
Yes, fraudsters are definitely flocking to online fraud. Possibly rushing. Maybe even stampeding!
A number of predictions were made about how much the EMV mandate would affect card-not-present fraud rates. Some projections were conservative, while others were more aggressive.
EMV stands for “Europay, MasterCard, Visa.” It’s the name for the anti-fraud process in which encoded chips are embedded in debit and credit cards. These chips are read by specialized point-of-sale (POS) devices when consumers check out at a retail outlet. They make counterfeiting physical credit cards much more costly and difficult than they used to be.
ACI Worldwide predicted a 12% increase in global card-not-present (CNP) fraud attempts for 2016, the first full calendar year of the EMV mandate. This increase, although in the double digits and troubling, wasn’t off-the-hook alarming. It roughly matched the pace of online sales growth, indicating that online merchants would see more fraud overall, but not an increase in the rate of fraud.
On the other hand, the U.S. Payments Forum, citing Forter and the Aite Group, projected a 22% increase in CNP fraud in 2016, a 36% increase in 2017, and a 23% increase in 2018.
And when it came to the 2016 holiday season, ACI Worldwide warned that CNP fraud in the U.S. could skyrocket by 43% compared to the 2015 holidays.
So what’s the actual story? As of September 2017, the numbers look like they’re trending towards the more aggressive projections.
A recent report from Experian indicated that eCommerce fraud rates in the US jumped by 33% last year. This alarming increase is supported by news from the Federal Trade Commission that the number of consumers reporting that their stolen data was used for credit card fraud more than doubled, from 16% in 2015 to more than 32% in 2016. In addition, the number of identity fraud victims in the U.S. jumped 18%, from 13.1 million to 15.4 million people.
Some other statistics that dramatize just how quickly fraudsters appear to be making the transition from card-present to card-not-present fraud:
- 134% increase in rejected account creations
- 51% increase in overall rejected transactions (Q4, 2016 vs. Q4, 2015)
- Average ticket value of a rejected transaction was twice as high as a legitimate one
What does this mean for online businesses?
If your eCommerce operations are suddenly seeing fraud attempts and attacks accelerate, understand that this is not a temporary blip, but the start of a long-term and growing phenomenon. In other words, you ain’t seen nothin’ yet.
Fortunately, enterprise-class fraud prevention solutions like Kount Complete that are delivered using the Software-as-a-Service (SaaS) model can be rapidly and cost-effectively deployed in as little as 10 days—without a complex and time-consuming IT project—and zero capital investment. This is in contrast to do-it-yourself, in-house projects that typically take at least 3-4 months (that’s January at the earliest and more likely February or later) and require substantial upfront investment in hardware, software, staffers and IT infrastructure.
If your eCommerce operations have NOT yet seen an increase in fraud attacks, good for you. But once again, understand that it’s only a matter of time before you become a target. If you’re not quite ready to commit to implementing stronger fraud prevention on your eCommerce site, don’t worry. Consider switching to one of the many payment service providers—such as BlueSnap, Braintree, Chase Paymentech, Recurly and others—that offer Kount antifraud protection integrated into their payment services. It’s a fast and easy way to get enterprise-class fraud prevention with little or no change to your day-to-day operations.
Still hesitating? Here is one more statistic that should motivate you to act:
- As of March 1, only 38% of retailers could process EMV payments.
What happens when the remaining 15 million retail outlets get “chip enabled” and fraudsters have nowhere to turn but online?
To learn more about mobile payments and online fraud, download our "Mobile Payments & Fraud: 2017 Report".