On October 1st, 2015 the Europay, Mastercard, Visa (EMV) shift in transaction liability happened in the United States. This meant that transaction liability transferred away from the payment processors and issuing banks to merchants who failed to implement the new technology. . The U.S. adoption of EMV has been a bumpy road, learn what 2016 has in store.

Combating Credit Card Fraud

The innovation of EMV was to insert microprocessor chips inside credit and debit cards. This chip creates a unique one-time code that gets changed with each purchase making the transaction information less attractive to fraudsters. “The code generated takes into account numerous different variables and is not linked to a card member’s account.”, explains John Krauss, Discover’s senior manager for card payments and reissuance strategy.

The Story So Far

Despite the liability shift, and even with the 2015 holiday season behind them, merchant migration to EMV technology has been slower than expected. Larger retailers like Target, which has been the victim of a large-scale credit card breach, have been quick to adopt the new technology. Smaller retailers have been reluctant to make the shift and are now responsible for the liability. Only 40% of all merchants in the U.S. are expected to make the shift to EMV credit card terminals by the end of 2016.

The State of EMV in 2016

EMV technology is not a perfect antidote against credit card fraud, but it can be a key component in an overall credit card security program. With EMV cards changing transaction data with each transaction, a new trend in credit card payment fraud toward card-not-present, (CNP) transactions is emerging. That’s because the technology does not protect against large-scale credit card data breaches. When these events occur, fraudsters steal credit card numbers and then use them in CNP environments that don’t require the original card.

Brian Hamilton, Senior Director of Risk Products at Visa, explains: “Once fraudsters obtain the card data and primary account holder information, the information can be used in a card-not-present environment, and we have seen that in other parts of the world — a migration of fraud to card-not-present transactions.” In fact, Javelin estimates that CNP fraud in the United States will be nearly 4 times greater than POS card fraud in 2018.

The Future

Although merchant and credit unions may be slow to adopt EMV, with only a quarter to one third of all POS transaction using the technology currently, it’s important to realize that the technology  has worked in the countries where it has been implemented. In European countries counterfeit card fraud has been reduced dramatically. It’s expected that as more merchants will adopt EMV credit card processing, POS credit card payment fraud will decrease. We should look at the October 2015 as the beginning, not the end for EMV technology in the U.S.

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