EMV, mobile payments take a bite out of card fraud

Category: Merchant Processing Industry

Over the past several years, a number of new payment technologies have been rolled out in the U.S. as a means of both making the purchasing process easier and more secure. And while it has taken a bit for these platforms to start catching on with consumers, it seems their more widespread use these days has really started to reduce the amount of debit and credit card fraud being seen across the country.

Credit card companies had put some 400 million EMV-enabled cards into circulation nationwide by the end of last year, and that number has been growing ever since, according to a report from Investors Business Daily. Meanwhile, a number of major tech firms have also launched their forays into the mobile payments sphere, which can likewise serve to significantly reduce card-present point-of-sale fraud.

New payment technologies are already chipping away at card fraud.New payment technologies are already chipping away at card fraud.

Why is that important?
It can be relatively easy for criminals to commit credit or debit card fraud when the cards in question bare the popular magnetic stripe on the back, the report said. That's because this technology has been around for decades and it's now relatively easy - and cheap - for crooks to clone those cards and use them for their own malicious purposes. But EMV and mobile platforms are more or less impossible for criminals to clone these days, and feature a more in-depth security system. Even a simple EMV transaction requires a person to enter a PIN code rather than simply signing their names, and that's much harder for criminals to do.

"Now, the encryption is taking place from that chip all the way to the bank," Mark Lanterman, of forensic analysis firm Computer Forensic Services, told the site. "It's point-to-point. There's no millisecond on the screen, and then it's encrypted. (The account number) is always encrypted."

The immediate impact
Soon after the EMV liability shift late last year, payment processors were seeing fraud significantly reduced, even at a time when the vast majority of businesses nationwide hadn't adopted it, the report said. Visa said that in January alone, instances of counterfeit card payments dropped 26 percent on an annual basis, and it's a trend that's expected to pick up steam. Likewise, mobile payment does not use people's account numbers in transactions, and is therefore basically impossible to expose in even the most sophisticated hacking attack.

With all this in mind, merchants who are on the fence about adopting either one (or both) of these payment platforms may want to think about the benefits of investing in POS devices that can handle both types of transactions. In some ways, they could be seen as being relatively small, one-time investments that pay for themselves by reducing instances of costly chargebacks, potentially by large amounts each year. In addition, the added security EMV and mobile bring to the entire payments ecosystem, benefiting not only merchants themselves, but also payment processors and consumers as well.