The biggest reason the recent EMV transition took place is that credit card fraud was significant nationwide, both in stores and online. And while there are ways to combat bogus e-commerce "card-not-present" purchases, the most concrete way for payment processing companies to deal with total credit card fraud was to introduce the liability shift toward chip-and-pin transactions. Meanwhile, CNP fraud continues, and has only increased since the liability shift because it became harder to commit in-person fraud.
Card-not-present fraud is prevalent in many parts of the U.S., but some states are more fertile ground from criminals than others, according to new data from Sift Science based on more than 1.3 million transactions. In Alaska, for example, more than 23 percent of all credit card transactions were tagged as being fraudulent, ahead of second-place Delaware, where fewer than 1 in 5 fell into that category. Mississippi (17.4 percent), Louisiana (16.5 percent), and Nevada (15.9 percent) rounded out the top five.
A look at the causes
On a state-by-state basis, there may be good reasons why fraud is so common, the report said. For instance, Alaska does not categorize a fraudulent purchase as theft unless its value exceeds $750. As many as 400 cases of this type of fraud are reported every month in the Last Frontier State.
Meanwhile, the state where fraudulent online purchases are actually shipped is not Alaska, which actually ranked 49th in this regard, but rather Delaware, the report said. In all, 27.9 percent of the examined purchases shipped there may have been fraudulent, just ahead of second-place Florida (26.8 percent). Georgia, Nevada, and West Virginia were also in the top five, all above 23.7 percent.
How much of a problem is it?
Clearly, online merchants suffer a lot of fraud, but across both e-commerce and brick-and-mortar channels, the problem is even more significant, according to new data from The Nilson Report. The total fraud losses seen last year amounted to $21.84 billion out of a total $31.31 trillion in purchases. This means that nearly 7 cents of every $100 spent on a credit or debit card over the course of 2015 was fraudulent.
And more worrying, the percentage of total global fraud experienced by merchants just in the U.S. is significantly outsized, the report said. While less than 23 percent of all purchases worldwide were made within the U.S., the nation accounted for nearly 39 percent of all fraud losses. This is, in part, what the EMV liability shift was meant to address in the first place.
"The industry's best defense against counterfeit fraud are EMV cards and the terminals needed to read their chips," said David Robertson, publisher of The Nilson Report. "EMV has been steadily penetrating dozens of countries, but in the U.S. where issuers poured EMV cards into the market, merchants lagged in deploying terminals."
For this reason, e-commerce and real-world merchants need to do more to fight fraud in general. For instance, those smaller businesses that have yet to adopt EMV-capable point-of-sale devices might need to take that step in the near future to better protect themselves, their customers, and the payments ecosystem overall.