Signatures are no longer needed for EMV (chip) transactions for all major card types. In our recent article No Signature Required - Card Brands Look to Improve Checkout Times, we discussed some significant changes in the POS industry. At the tail end of 2017, MasterCard, Discover, and AmEx announced that they would implement policies that eliminate the need for signatures in point-of-sale EMV transactions. Visa was initially reluctant to comply, but recently gave up the fight and announced they too will eliminate the need for signatures on EMV POS transactions in North America beginning in April of 2018.
The introduction of EMV chip cards made huge strides in decreasing fraud, but only for in-store transactions. The increased security of credit and debit cards using chip technology has driven fraudulent traffic to CNP transactions and e-commerce. Card Not Present (CNP) Transactions are those that occur when the card is physically not present (online, over the phone, mobile transactions, etc), and therefore do not utilize the chip feature that EMV cards have. According to Visa, fraud has decreased 70 percent from October 2015 (when chip cards were introduced in the United States) to December 2017. However, chip cards are just as susceptible to CNP fraud as magnetic stripe cards.
Card not present transaction fraud continues to rise since the establishment of the EMV chargeback liability shift last October. As card present transaction fraud decreases we've seen a direct increase in card not present transactions. CNP transactions include any payment made where the card is not physically present. As predicted, The US Payments Forum 2017 report concluded that the increase in security of chip cards forced fraudsters to focus their attention to CNP. They believe that this trend will continue into 2018 and we can expect to exceed $6 billion in fraud dollars.
Over the course of the year, the number of merchants using chip-enabled terminals more than doubled, with 39 percent (or 1.81 million) of all merchant locations using EMV technology. The majority of these merchants - 82 percent of them - were small and medium-sized businesses. Chip transactions comprised just about half (49 percent) of total payment volume in card present transactions.
Report Confirms EMV Expectations: Counterfeit Fraud Down, CNP Fraud Up
According to a July 2016 Card Fraud Control Benchmark Study from Auriemma Consulting Group, counterfeit card fraud has reached its lowest level since 2013, falling 18 percent in Q1 from the previous quarter. Counterfeit fraud losses have declined steadily relative to other categories since the industry’s EMV liability shift took effect late last year, and have decreased by nearly one-fourth since their peak in late 2014.
Last year at this time, news feeds in the payment card industry were abuzz with information about the Chargeback Liability that was taking place in October of 2015. Not to disappoint, new deadlines have been set for October of this year that will have card security pundits talking. The first impacts Visa card issuers, and will be a blessing to both consumers and merchants when it comes to diminishing fraudulent card use via alerts. The second brings EMV back to the forefront, with a new deadline for ATM's to accept EMV chip cards. Here is some education on both deadlines:
We are in the midst of a revolution in how consumers are checking out at POS terminals. We discussed last week in an article entitled "The EMV Reality is Sinking In" how there is a general confusion at card terminals across the US by both clerks and consumers, whether the POS system is both capable and enabled to accept EMV cards. This week, we take the discussion a step further and present the confusion banks have caused by issuing PIN & Signature cards in the US, rather than the more secure and globally used PIN & Chip cards.
Over the holidays both retail employees and customers got a dose of EMV reality. As a customer armed with a new EMV chip card approached a terminal to pay for his goods, he encountered a confusing situation. Some terminals didn’t accept chip cards and it was obvious he had to swipe. Others had a slot for pin cards and a swipe mechanism, and the clerk was quick to point out which to use. Others still allowed for the swipe, only to be followed by a loud beeping to instruct the user to use his chip. And then there were the EMV enabled terminals, with a slot visible to the card holder, but without the EMV functionality. Clerks, annoyed with the repetition, hastily made signs in some locations “officially” pointing out the shortcomings.
It's now October, and if you don't have your EMV terminal up and running, you are probably already being inundated with chargebacks that you are now liable for, right? It's the Zombie Apocalypse, and fraudsters are knocking down your doors with EMV-enabled cards in hand, to start charging purchases on your Non-EMV POS terminal, knowing you will be responsible for the chargebacks. It's the end of days, and your non-EMV terminal just blew up.
Thank you to those who submitted responses to our EMV poll (see last week's article "Poll of the Day: EMV). As promised, here are the results of the poll, so you can see where others in the industry stand with EMV deployment as we approach the EMV Chargeback Liability Shift this October: