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Will EMV save us Historically, fraud has shifted to overseas, card-not-
present (CNP) transactions because EMV cards don't
from fraud? offer the same protection in that milieu as they do in
environments where face-to-face transactions occur. In
France, for example, the new standards significantly
reduced counterfeit fraud but resulted in a commensurate
By Cliff Teston increase in CNP scams. In the United Kingdom, overall
Signature Card Services fraud for both transaction environments increased during
the changeover period until additional authentication
espite the hesitation by U.S. merchants and measures were introduced.
financial institutions to fully adopt Europay/
MasterCard/Visa (EMV) migration, the real- U.S. preparation
D ity is that by 2015, we will be joining most of
the global community by integrating EMV in the United Migration to EMV in the United States has been slower
States. Though you may see this as a cause to worry, it is than elsewhere, and it's hard to predict what the impact
important to remember that EMV will essentially reduce will be here. But "watch and wait" may not be the best
fraud – and who doesn't want that? strategy. Those who are slow to adopt EMV technology
may put themselves at risk, as counterfeiting schemes will
The idea behind the security of EMV cards is that naturally surge toward the most vulnerable transactions
fraudulent purchases are much harder to pull off because and merchants.
EMV cards contain a "smart chip" that is nearly impossible
to clone. While conventional mag stripe technology And for CNP merchants, EMV has a different set of issues.
reveals card information with one quick scan, chip cards If history is any guide, CNP merchants will likely see
require dynamic verification and hold significantly fraud increase as face-to-face fraud falls following the
more information within the chip, making life harder for EMV adoption.
fraudsters.
Argus Payments Inc., a payment gateway that specializes
So, once every U.S. merchant has an EMV terminal and in CNP for high-risk merchant categories, expects that
every consumer carries a smart card, will credit card after the EMV shift, the rate of fraud in CNP transactions
crooks be out of business? The answer is complex, given in the United States will rise – migrating away from card-
the experiences of other countries with EMV conversion, present (CP) targets. In preparation, online merchants and
the adaptive spirit of the fraud-committing community processors may do well to add dynamic authentication
and the changing technological landscape around capabilities to their checkout processes.
transaction authentication.
Unfortunately for CNP merchants, authentication
Two things are certain, however. First, EMV will bring requirements add friction to the online checkout process.
about a reduction in counterfeiting and lost and stolen Argus predicts that monitoring and balancing conversion
card fraud in the United States. Second, EMV is coming, rates of authenticated transactions against overall fraud
and we must be ready and able to pave the way for a rates will be a key practice for merchants seeking to
smooth transition. It is time for merchants to prepare maintain revenue while mitigating an increasing amount
by re-focusing now on the tried-and-true basics of fraud of fraud.
prevention and embracing new methodologies as they
become available. Those merchants may wish to enforce policies in real-time
using risk-scoring and categorization (high-value tickets
Previous EMV lessons or affiliate-based traffic sources may be good categories)
to determine the appropriate situations in which to
EMV has been widely adopted around the world, and require authentication, while allowing low-risk carts or
now that the U.S. transition is underway, networks are customers a more streamlined checkout.
beginning to implement their own EMV migration plans.
While fraud patterns before, during and after EMV Strong authentication
migration have varied from country to country, common
threads exist. Meanwhile, all merchants must take a fresh look at their
authentication practices. Merely operating an EMV-
Typically, fraud has surged in the card-present enabled terminal is just half the equation, as mag stripe
environment prior to migration deadlines and dropped cards will remain in consumer wallets for some time,
dramatically after EMV cards have been introduced. I sustaining the need for old-school screening practices.
wish I could tell you that all fraud will disappear once
EMV is in place, but sadly there is no "perfect protection" Face-to-face merchants should now bolster their card-
against crooks. acceptance protocols in preparation for any surge in
counterfeit and lost- or stolen-card fraud as the deadline

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