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Have EMV Chip Cards Reduced Credit Card Fraud?

money-card-business-credit-card-50987(1)With the widespread adoption of EMV chip card technology, shopping lines have slowed down. Impatient shoppers around the nation are wondering what the hold-up is all about. Why do these new cards take longer to process, and what is the benefit of using chip cards?

EMV chip cards are credit cards with computer chips to authenticate transactions. EMV stands for “Europay, MasterCard, and Visa” — the three companies that created the standard. However, many card manufacturers produce chip cards today. It is an international standard for credit cards, intended to prevent credit card fraud.

In the past, banks have been held responsible for the costs of credit card fraud. Because EMV technology supposedly increases security, banks and credit card issuers have pushed for a change in liability: merchants can now be held liable for processing fraudulent purchases.

This raises the question: do EMV chip cards truly reduce the number of cases of credit card fraud?

How EMV Chip Cards Reduce Fraud

EMV chip cards are more secure than a magnetic strip because they go through several forms of authentication before accepting a transaction. This is why there is a small wait during transactions. There is plenty of evidence to suggest that chip cards have reduced instances of curb fraud (fraud where the card is physically used).

Since October 1st, 2015, business owners in America have been held responsible for being EMV-compliant. After one year, EMV technology has started to put a dent in fraud, especially at ATMs. There have been many complications in implementing the technology, but analysts suggest that it will save the U.S. $700 million annually.

While statistics on fraud in America since the adoption of EMV is scarce, the technology has been used in several countries around the globe for years. Statistics from these countries show that it has clearly reduced credit card fraud rates. The UK has had a 70% reduction in counterfeit card transactions since adopting chip cards. In Canada, EMV has reduced annual losses from counterfeit or stolen cards from $245 million to $112 million.

Ongoing Problems

Credit card fraud will still continue to be a major problem in America. Fraudsters are still able to use EMV credit cards online and over the phone. Half of all credit card purchases are done without physical use of the card; in these instances, EMV provides absolutely no additional security benefit. Card makers are experimenting with alternative methods to bolster security for online purchases, but chip cards do not currently help with these transactions.

Furthermore, retailers who do not adopt EMV readers leave consumers susceptible to curb fraud. Because of the high cost of most EMV readers, many small businesses are unable to adopt them. Many consumers report that businesses still require customers to swipe their cards, which means the EMV system is not being taken advantage of. The prohibitively high cost of most EMV readers have spurred small business owners to file lawsuits in response to the liability shift.

Finally, consumers do not get much benefit from this new generation of credit card technology. While they do prevent cards from being used when physically stolen, the belief that chip cards will protect consumers from liability for fraudulent transactions is false. In fact, banks and credit card issuers primarily benefit from EMV.

Clearly, there are both positives and negatives to the implementation of EMV chip credit cards. In the future, additional security measures will be added to credit cards, and mobile payments may eventually render credit cards obsolete. For now, the problems of credit card fraud must be addressed. While EMV has had a rocky start in the US — and while critics have accused credit card issuers of having ulterior motives — it is the beginning of a process that will hopefully aim to protect consumers.

Cody Hill
Cody Hill
CODY is a freelance writer with an interest in keeping a pulse on current events. He loves traveling and exploring cultures from around the world. He is an an avid reader and enjoys researching new topics. You can follow him on Twitter.

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