Beginning in October 2015, the use of EMV (Europay, Mastercard, and Visa) chip cards has been implemented in the United States. A large-scale undertaking, the goal of the EMV transition was to reduce fraud. How? The “chip” cards have encrypted chips on the card that are read every time a customer “dips” it at checkout, reducing the ability for thieves to steal and use credit card numbers.  However, the EMV transition hasn’t been an easy one, with a handful of disbursement and certification issues. Despite these problems, has EMV been successful in reducing fraud?

Temporary Card Fraud Increase

Since October 2015, there has been an increase in credit card fraud, totaling approximately 4 Billion dollars. An additional 10 billion in fraud is expected by 2020, when the chip card implementation is complete. However, this is not due to the ineffectiveness of the chip card. Instead, it is a direct result of the phased chip card implementation.

To understand, let’s take a look at how the chip card works. EMV cards are “chip-enabled” but they still have a magnetic strip. The magnetic strip still exists for businesses that have not yet adopted EMV technology. In fact, “Only 20 percent of credit cards and 10 percent of debit cards have already migrated to chip technology.” The remainder of non-chip enabled cards leave a loophole for fraudsters to target. How? If thieves don’t have chip enabled cards or businesses don’t use an EMV certified Point of Sale (POS) system, thieves can circumvent the EMV system. They can swipe their card, and because it hasn’t been chip verified, they can then contest the charge and claim that it is fraudulent. Based on EMV rules, when a charge is contested, and the card hasn’t been dipped, the business will foot the bill, not the credit card company. An alternative scenario finds fraudsters using stolen or fake magnetic strip cards, in non-EMV enabled businesses. In this circumstance, the business is still responsible for charges to their system, because they aren’t using the required EMV system.

A Rush on Fraud

When chip cards are fully implemented in 2020, in-store fraud will be much harder to commit. However, until then, thieves are more motivated than ever to commit fraud. While it may seem like only businesses that aren’t yet EMV-enabled can be targeted, in reality all businesses are vulnerable. While magnetic strips are still in existence and occasionally in use, fraudsters will be finding ways to use them. For one example, “some enterprising criminals are removing the magnetic strip from chip-enabled cards and are placing them on gift certificates. This makes the chip-enabled card appear to be a gift card, which cashiers then run as regular cards. Because the card isn’t dipped, when the charge is marked as fraudulent and is charged back to the business, the company is the one footing the bill.”

Has EMV Impacted Fraud?

For now, the answer is unclear. In some ways, EMV chip cards are already working. According to Master Card “counterfeit card fraud is down at its Top 5 EMV-enabled merchants by more than 60 percent since October 2015.” In other ways, businesses are bearing the brunt of the EMV transition when charges are contested and billed back to business owners. Time will tell if EMV chip cards are beneficial to both credit card companies and other businesses alike.

To prevent fraud at your business, EMV enable your POS as quickly as possible. Train your employees fully on EMV and how fraud can be committed using chip cards, and keep an eye out for suspicious customers or activity.

Does your POS offer your business the support you need? Is it EMV enabled? Are you ready to simplify your business with the use of a new POS? Marketing 360 Payments can help.  If you are ready to talk with a Marketing 360 Payments representative about the right choice for your business, contact us today.