With great fanfare the ominous October 1st deadline for the EMV liablity shift came and went. There was lots of noise about what it means for merchants, what it means for fraudsters and what it means for consumers. By all accounts, implementation of the new liability rules is set to put a big and needed damper on fraud for card-present transactions. However, for all the good it does and protection it provides, experience from other nations shows one undeniable fact: Card-not-present fraud is likely going to increase.
Show Me the Numbers!
As The figure below shows. In the United Kingdom, even as counterfeit purchases went down, card-not-present fraud skyrocketed from 30% of all fraud to 65% of all fraud.
Why will Card-Not-Present-Fraud Increase?
There are three primary reasons for this large jump in % of Fraud that is coming from card-not-present transactions.
1. Easier to commit fraud
This is the more frightening reason. Fraudsters have decided it’s easier to scam card-not-present merchants than in-store merchants. The main reason for this is simple: all the smart card technology in the world doesn’t matter, if there is no way to verify it.
Evidence from Australia show that 6 years after the EMV liability shift occured card-not-present fraud increased in dollar amounts from approximately $30 million dollars per years to $225 million dollars per year. France had a similar experience. Based on these and other countries experiences, experts predict a 20% increase in CNP fraud in the United States once the EMV technology is widely adopted. Full data are in the graphs below.
2. Ecommerce is booming
It’s estimated that global ecommerce is set to grow by 25% in 2015 alone. Even if the percentage of CNP fraud remains the same, we can expect to see an increase in total numbers, because there will be more opportunities for scammers.
3. Less counterfeit fraud, but no decrease in card-not-present fraud
The number of incidence of counterfeit fraud decreased by 30%, which means that even if card-not-present fraud maintained the same number of incidence, the total number of fraudulent transactions went down, so the % of fraud that came from card-not-present transactions went up.