Why Online Fraud Is Expected to Spike
October 1 is right around the corner, and brick-and-mortar merchants are racing to adopt new credit card chip technology to avoid being liable for in-store counterfeit. Unfortunately, for online retailers, however, these chip-and-pin cards could present trouble for their customers' digital security.
The UK has already adopted Europay, MasterCard and Visa (EMV) chip-card technology (since 2005) and saw a sharp rise in card-not-present fraud (as seen in the graph below). Of course, however, the number of online transactions has also increased signficantly since then.
Those in the digital security industry credit card-not-present fraud increases with chip technology and expect similar results in the U.S. because, according to Trustev, EMV "greatly reduces the impact of in-store fraud, as the new cards with embedded chips generate a unique token for each transaction – making them difficult or impossible to counterfeit."
This means that thieves will target the industry's weakest spots - online commerce - where credit card information (number, expiration date and the CVV - card verification value - number generally found on the back of a card), is still entered manually.
According to this report (open PDF) online retailers will want to focus on bolstering its card-not-present controls, since other countries have seen significant rises in fraud after the arrival of EMV. Those interviewed by Aite Group April and May 2014 have invested or plan to invest in technologies such as risk-based authentication and/or tokenization for CNP transactions to get ahead of the situation.
For more info on EMV and the expected rise in CNP fraud, check out the infographic from Trustev below: