August 22, 2016 • Issue 16:08:02

CNP fraud: Evolving strategies
    for an evolving market

By Patti Murphy                                                  addresses – typically takes time to abate as EMV adoption
                                                                 takes time. Aite predicts 81 percent of credit cards and 57
T here is an old saw that likens payment fraud                   percent of debit cards in Americans' wallets will contain
              to a water balloon. As every youngster playing     EMV chips by the end of 2016; the 100 percent mark is
              with water balloons quickly learns, when you       expected to be reached in 2020.
              cut off the flow to any one area of a balloon the
water automatically finds someplace else to flow. Just like      In Australia, the EMV liability shift (which placed
that water, fraudsters, upon being deterred in the pursuit       responsibility for fraud prevention squarely onto
of ill-gotten gains using one card scam, simply seek a path      merchants) is blamed for a 30 percent fraud increase
of lesser resistance.                                            from 2013 to 2014 despite only modest (9 percent) growth
                                                                 in aggregate ecommerce sales during that period, Aite
"The organized crime rings behind so many of the fraud           noted in a recent report. A nearly identical shift occurred
attacks are able to nimbly evolve their strategies," said        following the 2011 EMV liability shift in Canada.
Julie Conroy, Research Director for Retail Banking at
Aite Group LLC. Seattle-based fraud consultant Bob               Meanwhile, in the U.K., where EMV implementation
O'Neil added, "There are no constants in fraud detection         preceded both Australia and Canada, card fraud losses
and prevention. Fraudsters quickly catch on" to any new          grew 18 percent in 2015, with a value of 88.5 million
prevention techniques and devise fresh attacks.                  British pounds ($114.7 million), according to Fair Isaac
                                                                 Corp. Seventy-five percent of that increase was directly
The migration to EMV (Europay, Mastercard and Visa)              attributable to CNP transactions, the bulk of which ($85
technologies for authorizing credit and debit card               million) were ecommerce transactions, FICO said.
payments at the physical POS, for example, has been
accompanied by an uptick in card-not-present (CNP)               Aite expects CNP fraud will cost U.S. retailers and banks
fraud in the United Kingdom, Australia and Canada. And           $7.2 billion annually by the end of 2020. "EMV migration
counterfeit card fraud – an irksome problem that EMV             represents a big win for straightforward, friction-free
                                                                 transacting, but at what cost?" asked Vanita Pandey,
                                                                 Vice President, Strategy and Product Marketing at
                                                                 ThreatMetrix.

                                                                 Contributed articles inside by:

                                                                 Steven Feldshuh....................................................................................30
                                                                 Brandes Elitch.........................................................................................32
                                                                 John Tucker..............................................................................................42
                                                                 Brett Husak..............................................................................................46
                                                                 Fran Sachs and Lorie Schrameck.....................................................48

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