By Karisse Hendrick, Editor-at-Large, CardNotPresent.com
On October 1, 2015, Visa and Mastercard changed the liability rules in the United States for fraudulent credit card purchases at card-present locations as an incentive for issuers and merchants to issue and accept EMV/chip-enabled cards. Fraudsters had learned how to easily transfer stolen card data onto cards with magnetic strips, making counterfeit fraud an estimated $4.5 billion dollar problem. While issuers previously had covered the cost of these losses, the liability shift of a year ago placed that burden on merchants with credit card terminals not yet enabled to accept chip cards. If merchants are compliant, but the issuer has not issued chip cards, the issuer foots the bill.
While the actual implementation of EMV was a card-present concern, experience from other global markets that had made the switch suggested the move would have a significant impact on card-not-present fraud rates. In the U.K., CNP fraud rose 79 percent in the first three years of EMV and it more than doubled in Australia. It became apparent in those countries that most fraudsters who made a career out of utilizing stolen credit cards didn’t suddenly decide to get a day job.
Thus, CNP merchants in the U.S. were warned to expect the same. A year after the U.S. liability shift, it’s apparent that the EMV shift in the card-present markets has significantly impacted CNP fraud rates and fraud departments while lowering card acceptance rates for subscription-based merchants and increasing security threats to CNP companies. And more importantly, because this conversion is not complete, we learned how
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