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Chip-Enabled Credit Card Adoption Unsuccessful in Curbing FraudOctober 11, 2019
In 2015 the US credit card industry began the adoption of the EMV standard to curb overwhelming levels of credit card fraud. With the provision of end-to-end encryption during card-present transactions, EMV technology aimed at preventing payment card counterfeiting.
We recently crossed the three-year anniversary of the EMV migration deadline, and it seems that the majority of financial institutions have managed to provide their customers with the updated technology. However, this move has not been overly successful in wiping out credit card fraud. As per statistics, of more than 60 million payment cards stolen in the past 12 months, chip-enabled cards represented an astounding 93%. Out of this 60 million, 45.8 million, or about 75%, were card-present records and were stolen at the point-of-sale devices, while only 25% were compromised in online breaches.
The above results reflect the lack of US merchant compliance with EMV implementation - and what is even more worrying is that financially-motivated threat groups are still exploiting this weakness.
The threat groups that are notorious for infiltrating merchant networks usually find their way to Point-of-Sale (POS) terminals on the target’s network and deploy POS malware. Card-present data is also collected through a more manual method by “skimmer groups”, who may also make use of “shimmers” to record and steal data from ATMs and POS systems. Once card data is stolen by one of the two ways mentioned above, it is commonly sold on various dark web criminal marketplaces.
Most card readers that are equipped to read EMV enabled chip cards also possess a built-in fallback magnetic stripe reader which allows the cards to be swiped at POS terminals. The swipe reader has two uses – firstly, cardholders can utilize their cards at merchant locations that have not fully transitioned to EMV enabled POS systems; and secondly, the cardholder can also fall back to the swipe method if the EMV chip is malfunctioning or damaged. As of today, refueling stations are the only merchants that are not liable for the EMV shift until October 2020. In other words, they have the choice to continue to provide a swipe-only option for the next two years without taking any liability or fault for any fraud that might occur at their locations, which could have otherwise been avoided via EMV adoption.
Apart from refueling stations, there are still many merchant locations that still ask customers to swipe their cards. These outlets have not yet migrated to newer EMV technology because of the high cost associated with the equipment and mainly consist of small business owners. However, such companies have now realized the importance of transitioning to EMV and are allocating appropriate budgets to achieve the same.
Nevertheless, until EMV implementation is more widespread among US merchants, it is advisable to make use of mobile payment systems like Android Pay, Google Pay, and Apple Pay wherever possible. These systems are not susceptible to shimming devices or POS malware, making them the most secure payment method available for the time being.
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