Credit Card Chip Technology Has Been Effective at Reducing Fraud. But…

... there are downsides. Developments are underway to plug the holes caused by the side effects of credit card chip technology.

Credit Card chip technology

We know that the United States was late in adopting widespread use of EMV (chip) credit cards. Finally, in 2015, we began catching up to the rest of the world when it came to the implementation of credit card chip technology. The results have been positive.

According to Visa, counterfeit credit card fraud dollars at US merchants that completed the chip upgrade dropped 76 percent between December 2015 and December 2017. The number of US merchants accepting chip cards jumped from 392,000 in September 2017 to 2.9 million in March 2018. As of March 2018, 97 percent of credit card transactions in the United States were made with chip cards.

BizTech reports that at the end of 2017, there were 7.1 billion EMV-enabled cards in circulation worldwide.

Despite all of these positive numbers, however, the United States is still lagging behind the rest of the world in total EMV saturation.

Drawbacks to Credit Card Chip Technology

So EMV cards have had a dramatic effect on reducing credit card fraud in the United States. But are there any downsides to the adoption of credit card chip technology? As with anything new and revolutionary, the answer is yes. Here are a few.

1. EMV cards are driving fraudsters to “card-not-present” fraud. Experts say this will be a growing problem for years to come. Javelin reports that card-not-present” fraud is now 81 percent more likely than in-person fraud at POS terminals.

2. New account fraud has seen more than a 100 percent increase since EMV cards became mainstream. It now accounts for over 20 percent of all fraud losses involving credit cards.

3. Because EMV cards are hard to duplicate, fraudsters are honing their skills in pure identity theft. According to BizTech, identity fraud victims increased by 8 percent in 2017, affecting 16.7 million consumers.

4. TechCrunch reports If you  that more and more “shimmers” are being placed inside ATM terminals by fraudsters. The shimmers cannot read chip data but can read magnetic data still present on most cards. Phony magnetic cards can then be produced. Magnetic cards are still widely accepted.

5. TechTarget reports that on some smart cards all data is not encrypted, which weakens the strength of the card’s protection.

EMV cards have gone a long way to prevent credit card fraud, especially the once common practice of card counterfeiting. But, as we’ve seen, fraudsters are creative and can find numerous ways around chip-implanted cards. So now what?

Biometrics as a Solution

Biometric authentication technology may help. In 2017, Mastercard started testing such a card. Wired reports that the card has a small biometric scanner in the right-hand corner, where the user places their fingerprint during transactions. The fingerprint is verified against a stored template, allowing legitimate transactions to go through.

Recently, Gemalto announced that the Bank of Cypress had selected it to supply the world’s first EMV biometric dual-interface payment card for both chip and contactless payment. The cardholder is required to enroll their fingerprint at a local bank branch. This security is then stored on the card and is compared to the database on every transaction.

Beyond Biometrics

In February 2018, Ingenico developed a new payment solution based on a technology generally referred to as “PIN on glass” or “PIN on mobile.” The technology enables customers to use both chip and a PIN on the merchant’s personal mobile device. A back-end Trust Service analyzes and verifies that the execution environment of the device is secure before the customer inters a PIN.

The bad news is that fraudsters are not only creative but also resilient. The good news is that modern technology providers and their deep pockets are just as creative and resilient. Total credit card security and fraud prevention is not currently at 100 percent. But with all of the technological developments taking place, it will probably become a reality in the near future. Let’s hope so.

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