How payments fraud is becoming more complex—and expensive
Recent reports that counterfeit card fraud is markedly down in the U.S. since the introduction of EMV chip cards in 2015 is fantastic news, except for retailers that also sell goods sells online. In that case fraud has merely moved from an in-store payment attempt to a card not present (CNP) one. For e-commerce only stores the rise in payments fraud attempts has been a deluge.
According to data from Visa as of June 2019 there were over 3.7 million merchant locations that accepted EMV cards, up almost 10 fold from September 2015, representing about 80% of U.S. storefronts. This shift to EMV has allowed merchants who have completed the chip upgrade to see an 87% drop in counterfeit card-related fraud dollar losses between September 2015 to March 2019.
While some thieves have moved to online channels due to the advent of EMV, others have not because they have just gotten smarter. Thieves are now applying for and receiving real credit cards with active EMV chips from banks. They are able to obtain real cards by creating synthetic identities that combine real social security numbers with fake ages and addresses. In doing so, thieves can obtain legitimate payment cards and continue to defraud banks, merchants, and the consumers whose identities they steal thereby making fraud prevention a more complex and costly problem to solve.