These EMV cards are much more secure in a face-to-face transaction – in person when someone physically swipes their card at a cash register. This is because issuing banks are able to verify the identity of a user via their signature on a paper receipt.
As the pace of retail evolution dictates retailers’ transaction, processes are constantly changing and fraud alongside them. In a struggle to stay on top of heavy competition, retailers are offering as many options to customers as possible when it comes to different ways of making a purchase. Consumers are now able to place orders online to be shipped to their homes or place orders from your mobile phone and other convenient methods.
However, these transaction processes are leaving behind more and more holes that fraud artists can exploit. While EMV reduced card-present fraud, card-not-present fraud has increased.
As a merchant, it is up to you to verify that the signature jotted down is similar to that on the customer’s card. Most recent EMV-capable terminals now use a PIN to verify the identity of a cardholder. However, these security measures do not apply to over-the-phone or online shopping.
CNP transactions (card-not-present) are very susceptible to fraudulent transactions. Issuing banks are still trying to work on improving CNP security, but to date, there is still no effective and efficient solution.
As of October 2015, the liability for fraudulent card-present transactions shifted from credit card issuer to the merchant. Now, if a fraudulent transaction occurs where an EMV card was used and the business in question had not set up to accept chip and pin payments, the merchant will be held liable for that transaction. Keep in mind that liability shift does not affect CNP transaction.
Previous EMV rollouts results of EMV cards in Canada, Mexico, Europe, and Australia have given e-commerce merchants cause for concern. Granted that card-present fraud has reduced drastically, the amount of CNP fraud has increased 79 percent in the United Kingdom and 50 percent in Australia and Canada.
This means that e-retailers in the United States should be very wary of what we fear could be a tremendous increase in the amount of online fraud. From a rough estimate, online fraud in the US could increase from approximately $3.1 billion to $6.4 billion.