What They Said About EMV Was True: CNP Fraud on the Rise

Posted by Jayme Moss on Aug 5, 2016 12:16:02 PM

EMV decreasing fraudReport Confirms EMV Expectations: Counterfeit Fraud Down, CNP Fraud Up

According to a July 2016 Card Fraud Control Benchmark Study from Auriemma Consulting Group, counterfeit card fraud has reached its lowest level since 2013, falling 18 percent in Q1 from the previous quarter. Counterfeit fraud losses have declined steadily relative to other categories since the industry’s EMV liability shift took effect late last year, and have decreased by nearly one-fourth since their peak in late 2014.

At the same time, however, the report continues, other types of fraud have increased, as predicted by many EMV and payment card industry pundits heading into the EMV Chargeback Liability Shift.  There has been a 12% jump in Card Not Present (CNP) fraud, making it the largest category of fraudulent activity. 

There is little doubt that counterfeit fraud reductions are correlated with EMV adoption.  EMV cards in circulation account for approximately 66% of credit cards, and more than 80% of cardholder spending, according to ACG data. Chip-on-chip transactions (a chip card used at an EMV-compliant terminal) still only account for 30% of card transactions, but are making an impact.  However, criminals are targeting less secure magnetic stripe cards, and also shifting their focus to e-commerce and other CNP transactions, to avoid chip technology altogether.

This is really no surprise.  As we discussed in our article from April of 2015, Batter Up: EMV Puts Card-Not-Present Fraud on Deck, there is evidence that card-not-present fraud will continue to rise as the EMV transition progresses, as fraudsters find it harder to commit fraud with EMV and look to new avenues to continue fraudulent activity.

Take for example what happened in Canada in 2008, when they rolled out chip-based cards nationwide. According to this data, Canada cut card fraud costs 55% from $195.1 million to $88.7 million in 2013. That sounds pretty good on the surface. But then domestic card-not-present fraud increased 133% from $102.1 million in 2008 to $238.4 million in 2013!  Just because you do not have to worry about the EMV chargeback liability shift for your CNP transactions, you must remain diligent about credit card security.

If you have questions about your security, do not hesitate to contact us to discuss.

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Topics: EMV