Will EMV migration prove to be the “universal remedy” for fraud? As a retailer, you have probably invested an enormous amount of time, effort, and money formulating your plan to address the continuing EMV migration; but every retailer must remember that EMV, or chip and pin technology, is just one element in the formula to prevent fraud for your business.
EMV was designed to better authenticate credit card transactions. Instead of swiping the card’s magnetic strip, consumers are prompted to insert their card into the EMV terminal and enter their unique pin number. This system adds several layers of protection, including an encrypted authorization number unique to that specific transaction, which makes it difficult to duplicate, and easy to track any fraud that does occur.
Although the deadline for EMV compliance has passed, there are many merchants who have opted not to upgrade their systems yet. With many large retailers having upgraded while smaller businesses stick to current systems, consumer experiences with EMV scanners are limited and spotty at best. Because of this, retailers may experience hurdles for both themselves and the consumer. One such hurdle is training on the new system – not only training staff, but training the consumer as well.
Although the credit card verification machined equipped with the EMV component have been deployed in major retailers and groceries for some time, there are many factors that keep consumers from utilizing them. Whether this is because many consumers haven’t been issued a chip-embedded card, they’re nervous and wary of this new technology, or they’ve stuck to swiping by choice, there is a good chance that a consumer has not had to perform the added steps required in an EMV transaction. For many consumers, the concept of a chip-embedded credit card is uncomfortable, and more than a few of these consumers have willingly chosen to stick with EMV-free cards, while those who do have the chip-embedded cards may not use them frequently enough to understand how they work.
For retailers who have not already upgraded to the EMV compliant verification equipment, there could be significant cost involved, especially on hardware. With consumer convenience remaining an important consideration, the retailer must strive to manage this new fraud prevention tool while ensuring consumers don’t also experience longer than normal lines and delays at check out.
So, with these added layers of security and privacy, does fraud go away? Probably not. Although not all retailers have an online ecommerce presence, it’s possible the occurrence of fraudulent transaction to become more focused on “card not present” transactions. As a point of reference, Europe’s migration to the chip and pin transaction has resulted in more than a 60% decline in fraud with card present transactions; however, those same markets have seen an increase in fraud with online transactions where the card is not present.
The United States is one of the last developed nations in the world to implement this technology, and it’s moving slowly. With the challenge of upgrading to a new system, many merchants are struggling to comply – while many consumers are still unaware and uneducated about this transition entirely. As fraud-prevention evolves, it can be assumed that fraud attempts will also evolve – but while EMV may not be a universal form of fraud prevention, it’s a big step in the right direction.
Co-contributor: Ray Hamilton