Is EMV In The Cards For The United States?

Card Processing | The United States is slowly catching up to the rest of the world in transaction processing, shifting from mag-stripe to more secure EMV payment cards.

As of October 2015, liability for fraud when a card is present will fall to the party that keeps the transaction from being processed via EMV technology—say, a merchant that hasn’t upgraded terminals.

“The liability shift isn’t a mandate. It’s voluntary,” says David Atkinson, a US-based EMV consultant. But merchants and issuers that can’t conduct EMV transactions assume liability for fraud. EMV stands for Europay, Mastercard and Visa.

The guidelines should help drive adoption of EMV chip cards in the US. It’s been slow in that department. As of 2014, just 7.3% of cards in the US contained an EMV chip. The rate is nearly 60% in Canada and Latin America and 83% in many European countries.

Not surprisingly, card fraud rates in the United States are higher than in scores of countries. According to a 2014 report by the Aite Group, more than 40% of US consumers experienced card fraud in the past five years. In the United Kingdom, the number is 28%.

Before EMV technology came along, credit card fraud in the United States was actually less common than in many other nations. In 2004, the US recorded fraud rates of about 0.05% of transaction values, compared with 0.14 % in the UK, according to the Federal Reserve Bank of Atlanta.

At the time, many card transactions in Europe and the United Kingdom were completed offline, says Simon Laker, principal consultant with Consult Hyperion. “There was no connectivity to the issuer to authenticate the card.”

Communications costs in the United States tended to be lower, and most transactions were completed online. At the point of sale, the issuer could check the account and indicate whether a transaction should go through, Laker says.

Then the UK migrated to chip-and-PIN cards. Between 2007 and 2014, losses from counterfeit cards plummeted by nearly two-thirds, according to Financial Fraud Action UK. Conversely, card fraud in the United States hit 0.10% of transaction values in 2014, Aite Group found.

However, although EMV technology cuts the potential for fraud in face-to-face transactions, it doesn’t help in card-not-present transactions, where fraud is inscreasingly moving.