Fall 2015 will mark a significant event for businesses and financial institutions in the United States. In October, organizations face a deadline to have technology in place that will allow customers to use EMV chip-enabled payment cards at the point of sale. While designed to increase transaction security by encrypting payment details and account numbers, the migration to EMV card technology opens up a new problem for organizations: card-not-present (CNP) fraud. Improved identity verification techniques are essential for those conducting business over the phone or online. In addition, understanding the shift toward more instances of CNP fraud by criminals will allow businesses to stop the practice in its tracks.
CNP Fraud Expected to Rise
CNP fraud is expected to increase following the adoption of EMV cards in the United States. According to the Aite Group and reported on by CSO Online, in the five years following the transition to EMV technology in Canada card-not-present fraud increased by CA $171 million while annual counterfeit card fraud dropped by CA $134 million. As the U.S. prepares to make its own switch from magnetic stripe cards to EMV chip cards, businesses and financial institutions need to be on the look-out for a shift in fraud tactics here as well. With EMV chip cards difficult, if not impossible to counterfeit, fraudsters have turned to using account numbers and compromised identities to bypass security online and through call centers.
Fighting Back against CNP Fraud
It’s important to remember that the vast majority of transactions are completed with legitimate individuals, and organizations must do everything possible to limit any added friction for those good customers.
Identity verification and fraud prevention programs need to have a multilayered approach in order to effectively prevent fraud. That way, when a legitimate consumer goes through the authentication process, he or she can quickly be verified without added friction. And, those transactions initiated by fraudsters that raise fraud flags can be addressed and escalated for further review when necessary.
Information such as email addresses and passwords, as well as identity and account details, are targeted by hackers and become exposed in data breaches. Fraudsters then try to sneak past online authenticators or talk their way past call center operators using the stolen credentials. With CNP fraud on the rise as EMV cards roll out in the U.S., organizations must take the necessary steps to ensure legitimate customers gain access to products and services while also preventing fraud.
Learn more about ID verification and how the transition to EMV cards can affect organizations in physical and virtual locations by contacting a representative at IDology today at (866) 520-1234.