Could ‘Flood Of Fraud’ Be Headed To U.S.?

By Pete Rizzo (@pete_rizzo_

Despite years of anticipation and a successful rollout abroad, EMV continues to stall in the U.S., with even major networks openly debating the key deadlines. Meanwhile, merchants and issuers have been left without a decisive path forward on a proven solution to their escalating fraud problems.

Predictive analytics specialist FICO released new data on October 10 that found that U.S. credit card fraud jumped 17 percent from January 2011 to September 2012, and that during this time, card-not-present (CNP) fraud spiked 25 percent. FICO cited the lack of EMV standards in the U.S. as a key driver of this rise.

Allen Friedman, associate director of business development for TSYS’ merchant segment, agrees with this assessment. However, in an interview with, Friedman’s statements indicate that FICO’s comments on EMV lack a necessary urgency.

“As adoption nears 80 to 100 percent in Europe, and is already underway in Asia, Canada, Australia and most other developed countries, fraud will move to the U.S.,” Friedman said. “We are actually a bit late in our efforts but now, rather than later, is the time to stem the flood of fraud.”

Friedman says EMV is the best proven method of reducing fraud at the point of sale in a card-present environment. Past research only bolsters his view – Since 2009, CNP fraud in the U.K. has fallen by $207 million.

For more on why the U.S. has yet to embrace EMV standards and how card manufacturers can help ease this transition, read our full interview with Friedman below. Allen, last time we spoke, we discussed how EMV’s relevance could be shifting now that there are many ways to secure the authenticating data generated by the chip during a payment transaction, and we also discussed the role that EMV has played in many countries. Why EMV and why now?

Allen Friedman: EMV is the best proven method of drastically reducing fraud at the point-of-sale in a card-present environment. There is really no better way to authenticate a genuine card and, in the case of PIN, the cardholder. As adoption nears 80 to 100 percent in Europe, and is already underway in Asia, Canada, Australia and most other developed countries, the fraud will move to the U.S. We are actually a bit late in our efforts, but now, rather than later, is the time to stem the flood of fraud.

We are noticing that in the battle between signature vs. PIN, the U.S. seems to be leaning toward signature. Why is this? What benefits or potential problems could this cause later down the road?

From a card issuing perspective, it is easier, faster and less expensive to produce and maintain signature-verified cards. There is agreement in the industry that PIN is more secure, but opinions differ on whether the additional time and expense are worth that additional measure of security. Many issuers that plan on introducing chip and signature expect to move their portfolios to chip and PIN in the future.

U.S card issuers are requiring merchants to adopt chip-based EMV cards by October 15, 2014. What suggestions can TSYS offer to merchants as they prepare for the deadline?

Let’s clarify what’s scheduled to happen on October 15, 2014. The liability for accepting a counterfeit EMV card at non-EMV capable POS devices will shift to the acquirer (and likely the merchant). In some cases that liability also includes lost and stolen cards.

Businesses that wish to avoid the risk of this liability should make plans to upgrade their POS hardware and software to enable the processing of the enhanced data on EMV cards. Each business should analyze their risk and the cost of upgrading to determine when they need to make the change.

To piggyback off that question, how are the limited number of card manufacturers going to address the demand for these requirements in such a limited amount of time? Will this be a race to the finish line or have enough processes been put into place to achieve this deadline?

This question would be better answered by a card manufacturer, but I can say that chip card manufacturers are ready to work with issuers and issuing processors. Some issuers are already starting to make these cards available, but there is really not a time limitation for issuers. It’s taken many years for EMV to become commonplace in Europe, and no one realistically expects the U.S. to saturate the credit card market with EMV in the next 22 months.

Allen Friedman, Associate Director of Business Development for TSYS’ Merchant Segment

Associate Director of Business Development for TSYS’ Merchant Segment in Tempe, Ariz., Allen Friedman is responsible for the core authorization and capture platforms, payment forms (including the card brands and EMV), and connectivity solutions.

Allen joined Vital Processing Services (now TSYS Acquiring Solutions) in 1999 and has held a variety of management positions in technical support, implementation and product. Allen uses his technical expertise to create product solutions.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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