Fraud Struggles in a Post-EMV World

by Sarah Grotta 0

When the U.S. began to get serious about migrating cards and POS terminal to EMV, the industry looked to other geographies that had completed their transition to EMV to understand what to expect. As it turned out, looking at the Canadian or UK markets was really of little help to predict the tumult that occurred in the U.S.  A blog posted to Multichannel Merchant warns that looking to other markets to understand how fraud has and will change in the post-EMV world would also be a mistake.  The U.S. market is not just larger and more complex, criminals have been sharpening their skills to exploit payment and financial systems EMV or no-EMV.  The blog offers up some sobering statistics:

Data from 2016 and 2017 reveal that post-EMV, American merchants are struggling with significantly greater fraud losses and are having to devote more resources than ever to fighting fraud.

  • Fraud losses now consume 8% of the average ecommerce retailer’s revenue stream, up five percent over 2016 losses
  • Fraud management eats up 21% of their operational costs, up nearly 17% over 2016 losses
  • These losses and costs are far more burdensome for digital goods merchants, who sell instantly downloadable goods like tickets and eBooks: their fraud spend increased by 42% year-over-year
  • Perhaps most revealing, 74% of the budget dedicated to fighting fraud actually goes to overhead items such as technology, personnel and administration, rather than directly to fraud prevention

One of the big drivers behind the spike in the threat levels is that fraudsters targeting American retailers today are the beneficiaries of years of tactical and technological innovation and CNP fraud learnings that have accumulated since previous EMV migrations. On any given day, digital criminals can be caught exploiting merchants’ buy online pickup in store (BOPIS) options, abusing the security gaps in digital wallets, overtaking customer retailer accounts to send goods to the wrong locations, and more.

Since some of these technologies or options didn’t even exist just a few short years ago, these tactics didn’t necessarily register as notable fraud threats once the shift to EMV began. Unfortunately, this all amounts to an early warning sign that the breadth and depth of risk from criminals will only rise as ecommerce continues to grow.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

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