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He urged banks and merchants to get serious about card
fraud. EMV, alone, is not enough, he said, especially when
coupled with signature authorization.
EMV refers to standards that apply to computer chips
embedded in plastic cards and chip-reading technologies
in card-accepting devices. The chips validate that the card
is legitimate; customer authentication continues to be
signature based, at least in the United States.
The card brands decreed that by Oct. 1, 2015, all payment
cards issued by U.S. financial institutions must contain
EMV-compliant chips, and all merchants must be using
Insider's report on payments EMV-compliant terminals. After that date liability for
fraudulent transactions falls on the party that is not EMV
EMV and the law more than one party to a fraudulent transaction is not EMV
compliant. Liability remains a shared responsibility if
compliant or if all parties are EMV compliant.
of unintended Powell is one in a growing chorus of experts warning the
present EMV game plan for the United States doesn't go far
consequences enough.
PINning down EMV security
By Patti Murphy "Given the current technologies we have at our disposal,
ProScribes Inc. we should assess the continued use of signatures as a
means of authenticating card transactions," Powell said.
he law of unintended consequences posits that "New approaches to authentication increasingly offer
even the best of intentions can trigger unpleas- greater assurance and protection."
ant situations. It happens in the payments space.
T Twenty years ago, for example, financial institu- Indeed, moving to EMV and not requiring PIN authenti-
tions and their business customers were losing $10 billion cation could have several unintended consequences, in-
a year, or more, to check fraud. cluding increased "friendly fraud." Friendly fraud is false
or questionable claims of fraudulent transactions filed
The marketplace at the time was swamped with inexpensive by cardholders that retailers pay rather than challenge.
desktop publishing software, and laser printer-compatible Friendly fraud costs retailers $11.8 billion a year, accord-
check stock was readily available at office supply stores. In ing to Monica Eaton-Cardone, Chief Operating Officer at
addition, check clearing was a paper- and labor-intensive Chargebacks911. And online retailers bear the brunt of that
process that took days to complete, making it easy for cost, she added, since no physical traces are left by online
fraudsters to flood local markets with bogus checks and shoppers.
leave town before returns started rolling in.
Chip cards authorized with personal identification
As credit and debit card adoption spread, the underlying numbers programmed into the chips are believed to be
technologies improved, the Check 21 Act ushered in far more secure than chip and signature cards. When the
image-based clearing, and check fraud began to fall. Association for Financial Professionals asked its members
However, it soon was eclipsed by card fraud, especially to weigh in on card data security recently, 61 percent said
fraud perpetrated with credit cards. they believed chip and PIN validation to be the most
effective defense against credit and debit card fraud.
The United States is now transitioning to Europay,
MasterCard and Visa (EMV) technology. Some experts Fraud threatens everyone in the payments space. In 2012,
warn one unintended consequence may be to push 31.1 million unauthorized transactions were processed
more crooks online and to other card-not-present (CNP) through the banking systems, and those transactions had
situations. Javelin Strategy & Research, for example, issued a combined total value of $6.1 billion, according to the 2013
a report in June 2015 predicting CNP fraud will nearly Federal Reserve Retail Payments Study. Most of that activity
double between now and 2018. involved cards (credit, debit and prepaid) – 92 percent of
the number of unauthorized transactions and 65 percent of
Federal Reserve Board Governor Jerome H. Powell also the total dollars lost. (Checks accounted for just 3 percent
spoke to the issue in June during a payments security of the total number and 16 percent of total dollars lost.)
conference at the Federal Reserve Bank of Kansas City. Not included in that price tag, of course, are the associated
labor costs.
26
He urged banks and merchants to get serious about card
fraud. EMV, alone, is not enough, he said, especially when
coupled with signature authorization.
EMV refers to standards that apply to computer chips
embedded in plastic cards and chip-reading technologies
in card-accepting devices. The chips validate that the card
is legitimate; customer authentication continues to be
signature based, at least in the United States.
The card brands decreed that by Oct. 1, 2015, all payment
cards issued by U.S. financial institutions must contain
EMV-compliant chips, and all merchants must be using
Insider's report on payments EMV-compliant terminals. After that date liability for
fraudulent transactions falls on the party that is not EMV
EMV and the law more than one party to a fraudulent transaction is not EMV
compliant. Liability remains a shared responsibility if
compliant or if all parties are EMV compliant.
of unintended Powell is one in a growing chorus of experts warning the
present EMV game plan for the United States doesn't go far
consequences enough.
PINning down EMV security
By Patti Murphy "Given the current technologies we have at our disposal,
ProScribes Inc. we should assess the continued use of signatures as a
means of authenticating card transactions," Powell said.
he law of unintended consequences posits that "New approaches to authentication increasingly offer
even the best of intentions can trigger unpleas- greater assurance and protection."
ant situations. It happens in the payments space.
T Twenty years ago, for example, financial institu- Indeed, moving to EMV and not requiring PIN authenti-
tions and their business customers were losing $10 billion cation could have several unintended consequences, in-
a year, or more, to check fraud. cluding increased "friendly fraud." Friendly fraud is false
or questionable claims of fraudulent transactions filed
The marketplace at the time was swamped with inexpensive by cardholders that retailers pay rather than challenge.
desktop publishing software, and laser printer-compatible Friendly fraud costs retailers $11.8 billion a year, accord-
check stock was readily available at office supply stores. In ing to Monica Eaton-Cardone, Chief Operating Officer at
addition, check clearing was a paper- and labor-intensive Chargebacks911. And online retailers bear the brunt of that
process that took days to complete, making it easy for cost, she added, since no physical traces are left by online
fraudsters to flood local markets with bogus checks and shoppers.
leave town before returns started rolling in.
Chip cards authorized with personal identification
As credit and debit card adoption spread, the underlying numbers programmed into the chips are believed to be
technologies improved, the Check 21 Act ushered in far more secure than chip and signature cards. When the
image-based clearing, and check fraud began to fall. Association for Financial Professionals asked its members
However, it soon was eclipsed by card fraud, especially to weigh in on card data security recently, 61 percent said
fraud perpetrated with credit cards. they believed chip and PIN validation to be the most
effective defense against credit and debit card fraud.
The United States is now transitioning to Europay,
MasterCard and Visa (EMV) technology. Some experts Fraud threatens everyone in the payments space. In 2012,
warn one unintended consequence may be to push 31.1 million unauthorized transactions were processed
more crooks online and to other card-not-present (CNP) through the banking systems, and those transactions had
situations. Javelin Strategy & Research, for example, issued a combined total value of $6.1 billion, according to the 2013
a report in June 2015 predicting CNP fraud will nearly Federal Reserve Retail Payments Study. Most of that activity
double between now and 2018. involved cards (credit, debit and prepaid) – 92 percent of
the number of unauthorized transactions and 65 percent of
Federal Reserve Board Governor Jerome H. Powell also the total dollars lost. (Checks accounted for just 3 percent
spoke to the issue in June during a payments security of the total number and 16 percent of total dollars lost.)
conference at the Federal Reserve Bank of Kansas City. Not included in that price tag, of course, are the associated
labor costs.
26
