02/09/2015

By Monica Eaton-Cardone, CIO and Co-Founder of Global Risk Technologies

Businesses are being warned that the rollout of chip and PIN card protection (EMV) in the United States is likely to prompt a major shift in credit card fraud to card not present (CNP) transactions across the UK and Europe. Here I will discuss how to combat a new wave of CNP fraud and recommends some simple steps business can implement improve risk protection, whilst at the same time enhancing customer satisfaction.

2004 was the year that EMV technology was first introduced to the public as chip and PIN, piloting in a period of transformation in transaction technology that’s effects are still blighting businesses today.

While EMV put a considerable dent in the rates of lost or stolen cards, and counterfeit card fraud, its adoption in the UK wasn’t the fraud cure that some industry insiders had hoped. Criminals simply looked elsewhere for an easier way to commit fraud and since UK-issued cards retained their mag strip to ensure backward compatibility, captured card data was used to commit fraud in countries that had yet to migrate to chip and PIN. A few years later, fraudsters started exploiting the spectacular rise of ecommerce with an equally booming CNP crime wave that sidesteps many of the security benefits of EMV.

Since the USA is only set to fully adopt EMV by October 2015, its global repercussions relating to fraud have yet to be felt. Business everywhere should be aware of the new threat and take notice as fraudsters start to look elsewhere for fresh opportunities.

For years, America has been too tempting a target to ignore. In a large-scale sample of cards by analytic software firm FICO in 2014, the US accounted for an incredible 47% of the fraudulent cross-border transactions on UK debit cards – a pattern that can only really be explained by the country’s late adoption of EMV. Once the US completes its migration, the full force of stolen card monetisation will focus on CNP simply because fraudsters are running out of places to go.

CNP fraud represents 70% of total card fraud losses but ecommerce profits continue to soar, and here’s the dilemma for retailers. Without doubt, getting that customer experience right is crucial, but get the experience wrong and you increase the risk of transaction abandonment or raise fears about the safety of ecommerce.

Fraud prevention technologies are key to combatting this rising threat and reducing the likelihood of expensive chargebacks. Global Risk Technologies is dedicated to combatting CNP fraud and recommends some simple steps that every business can follow that increase risk protection while at the same time enhancing customer satisfaction:

• Concentrate on customer service – Happy and well-informed customers are more likely to talk to the retailer than head straight to their bank to demand a chargeback. They’re also likely to spend more too.

• Optimise logistics – Speedy delivery of goods combined with an effective paper trail keeps customers happy and can also help highlight potentially fraudulent transactions.

• Maintain impeccable records – If you have the customer’s signature on file, their fraudulent claim that they “never got the parcel” is easy to disprove.

The successful rollout of EMV across the world suggests that after migration, the US will see substantially reduced instances of point of sale (POS) fraud but at the same time a correlating increase in CNP fraud.

With so much commerce now online, CNP fraud will be a problem for all types of businesses to overcome. By following the above techniques and implementing best practices, businesses will find the most effective way to keep their losses to a minimum as well as tackle renewed threats.