We have received your pre-application with us for a free quote!
Within 24 business hours, one of our account managers will contact you to discuss & explain the best possible processing solution for your business including all applicable rates & fees.
The account manager will work with you from start to finish of the application, and will remain your dedicated account manager for the life of the account!
Thanks again and we’ll be in touch soon.
If the US Follows the Post EMV Fraud Path of TurkeyIf the United States were to follow the post EMV fraud path of Turkey then the US will see fraud peak at around $9.42 Billion per year in 2022, with almost no change in fraud levels from 2017 to 2022. Like the United States, Turkey saw large increases in CNP fraud after the first year of EMV Chip and Pin implementation; however, Turkey quickly turned the situation around and has kept fraud steady. What can the United States do to put the breaks on fraud growth and can we learn anything from Turkey?
The glaring difference between the US and Turkey is that the later has never played fast and loose with fraud. While other nations have seen sometimes wild ups and downs in card fraud, Turkey has remained flat since 2008. Much of the credit in Turkey goes to banking institutions and in 2015, Garanti Bank won the FICO award for fraud control. Despite having low fraud to begin with, Turkey continues to invest in best-in-class fraud prevention tools to stay ahead of the criminals and protect businesses and consumers.
Just to be clear, Turkey is no laggard when it comes to card use. In 2013, 75% of the population had cards with a total of 57 million cards in use. Turkey has seen world leading growth in ecommerce and currently 25% of Turks shop online. Turkey is still a traditional society and most cards are used to withdraw cash, but 70% of the people who use the internet are under 35, boding well for the continued growth of ecommerce. Because of the rapid growth of ecommerce and tight controls on other types of fraud, most criminal purchases are in card-not-present transactions, with these transactions making up nearly 65% of total losses in Turkey.
If there is a lesson to be learned from Turkey it’s that vigilance matters and that building products and services with a strong eye on fraud can reap continuous rewards soon after the investments are made. Further, even when things are good, they don’t let their guard down. We can all learn a thing or two from Turkey and in the coming years, as mobile payments take center stage, it behooves us to keep an eye on how Turkey approaches fraud in this new channel. It could save us a fortune, literally.
If the US Follows the Post EMV Fraud Path of the Turkey
Best-in-Class Fraud Prevention as a Matter of Principle
If the United States were to follow the post EMV fraud path of Turkey then the US will see fraud peak at around $9.42 Billion per year in 2022, with almost no change in fraud levels from 2017 to 2022. Like the United States, Turkey saw large increases in CNP fraud after the first year of EMV Chip and Pin implementation; however, Turkey quickly turned the situation around and has kept fraud steady. What can the United States do to put the breaks on fraud growth and can we learn anything from Turkey?
The glaring difference between the US and Turkey is that the later has never played fast and loose with fraud. While other nations have seen sometimes wild ups and downs in card fraud, Turkey has remained flat since 2008. Much of the credit in Turkey goes to banking institutions and in 2015, Garanti Bank won the FICO award for fraud control. Despite having low fraud to begin with, Turkey continues to invest in best-in-class fraud prevention tools to stay ahead of the criminals and protect businesses and consumers.
Just to be clear, Turkey is no laggard when it comes to card use. In 2013, 75% of the population had cards with a total of 57 million cards in use. Turkey has seen world leading growth in ecommerce and currently 25% of Turks shop online. Turkey is still a traditional society and most cards are used to withdraw cash, but 70% of the people who use the internet are under 35, boding well for the continued growth of ecommerce. Because of the rapid growth of ecommerce and tight controls on other types of fraud, most criminal purchases are in card-not-present transactions, with these transactions making up nearly 65% of total losses in Turkey.
If there is a lesson to be learned from Turkey it’s that vigilance matters and that building products and services with a strong eye on fraud can reap continuous rewards soon after the investments are made. Further, even when things are good, they don’t let their guard down. We can all learn a thing or two from Turkey and in the coming years, as mobile payments take center stage, it behooves us to keep an eye on how Turkey approaches fraud in this new channel. It could save us a fortune, literally.
If the US Follows the Fraud Path of the GermanyIf the United States were to follow the post EMV fraud path of Germany then the US will see fraud peak at around $19 Billion per year in 2020, and then fall to roughly 17 Billion dollars by 2022. Like in most countries after they implement EMV Chip and Pin cards, most of the fraud increase comes in the form of CNP fraud. Unlike many countries, Germany kept the growth in CNP losses to a respectable 37% over a six-year period. By contrast the United States saw a 26% increase in fraud in the first year after the EMV liability shift took place. While this doesn’t bode well for the United States, it is not an irredeemable situation. Like other countries, we can institute tough of fraud policies and begin to bend the curve sooner than later.
An interesting difference between the German and US card markets is the reliance of German purchasers on debit card sales in lieu of credit cards. Credit cards only make up 21% of all purchases. A full 50% of transactions come from SEPA direct debit and Open Invoice, an invoice and echeck payment platform. The reliance on these non-credit card payment methods explains Germany’s low ratio of credit card fraud to sales of 2.1%, something we couldn’t easily replicate in the US.
What else separates the German Market from the United States? One important difference is the way that fraud is paid for. In the US, card providers must build fraud losses into product costs and banks generally cover all legitimate claims of fraud. In Germany, they use an insurance system that creates a pool of funds from small fees on every transaction. When fraud occurs, they reimbursement comes from the pool of funds. There has been criticism that it would be better and cheaper to invest this money in better technology, but with low fraud overall, Germany doesn’t need to fix a system that’s not, by world standards, broke.
If the US Follows the Fraud Path of the NetherlandsAfter seeing an initial increase in card-not-present and counterfeit fraud in the first few years after EMV adoption, the Netherlands saw the curve start to bend downwards and today is often considered a gold standard in fraud prevention. If the United States were to follow the post EMV fraud path of the Netherlands then in 2022, the US will have fraud totaling $15.61 Billion, most of the increase comes in the form of Card-Not-Present fraud. Unfortunately, the US is already on track to blow past this amount and will need better systems of payment of fraud detection to bring it down.
What’s different about the Netherlands market that allows them to beat the fraudsters and maintain low overall fraud levels. To be sure, good implementation of security systems helps keep credit card fraud rates low. However, the primary source of fraud prevention is the actual low number of cards that are used for purchases.
The banks in the Netherlands created a payment platform called iDeal, which has evolved into the most popular payment platform for Dutch ecommerce sites. The primary benefit of the system is that it gives consumers easy and secure access to their banks electronic transfer services. The transaction is a simple transfer from one account to another, no exchange of a credit card number with the merchant is involved. One of the primary benefits is that transactions utilize the extensive security capabilities of banks and robust consumer authentication protocols such as two-factor authentication.
While iDeal has provided a robust way to keep CNP fraud low, it does come with some caveats. There are no rewards programs for using the system and victims of fraud or consumers who purchased poor quality products don’t have the right to request a chargeback from their bank. If you want a refund from an online shop, you must contact the store and work it out on your own.
Dutch fraud rates are predicted to remain low for the foreseeable future. The reason why? There is lower hanging fruit in other countries. Why try to beat a difficult system, when there are so many less secure countries that have plenty of fruit.
If the US Follows the Fraud Path of FranceFrance has among the highest fraud losses in all of Europe and a direct comparison with the United States is difficult for one reason, France’s fraud profile is very different than any other country. France, like the United States, has a serious problem with Fraud, but unlike the US, France doesn’t have a growing problem with CNP, in fact they mostly got that under control with roughly 6 Million Euros in fraud in 2013. Where France has faltered is in failing to curb lost and stolen card fraud and in the explosive growth of ID fraud, which ballooned from a negligible amount to €284 Million 7 years after the EMV shift. Part of the reason for the shift in criminal strategies is the simple fact that France implemented Chip & Pin technology long ago, 12 years before EMV was implemented. This gave criminals a head start on finding new ways to rip off consumer. If criminals couldn’t complete purchases at the register with someone else’s card, why not steal consumer identities and get a real card under their name?
Much of ID fraud that occurs in France is carried out through one primary tool, stealing consumer’s personal data. If the criminals have your personal data, they can call your banks customer service, pretend they are you and seek access to card information. Fraudsters can also use your personal information to fill out credit card applications and get real cards in the mail.
If the United States successfully cracks down on Counterfeit & CNP fraud, will ID theft be the next wave of fraud? It may happen regardless. It seems like there isn’t a quarter that goes by without news of another data breach with personal and credit card information being the primary reward for digital pirates. Luckily, there are tools arriving to help fight ID Fraud. Innovative technologies such as Spanish CONFIRMA Sistemas de Información, utilize FICO technology to manage fraud detection rules and connect institutions to a database of shared credit origination information collected by the financial entities that use the service. This allows banks and card issuers to intelligently flag suspicious credit card applications.
Another innovative fraud prevention technology that originated in France is a technology called MotionCode by Oberthur Technologies. Utilizing their deep expertise in Chip & Pin technology, Oberthur Technologies created a card that changes the 3-character security code on the back of credit cards every hour on the hour. This could have profound effects on CNP fraud, as criminals couldn’t use stolen information in CNP transactions.
If the US Follows the Post EMV Fraud Path of SpainThe United States should be working hard to mimic the modest growth in CNP fraud seen in Spain. If the United States were to follow the post EMV fraud path of Spain then the US will see fraud peak at respectable $8.71 Billion per year in 2022, a modest 16% increase when compared to $7.5 Billion in losses in 2015. Unfortunately, the United States has already missed the mark on this. The US saw fraud increase by 26% between October 2015 and October 2016.
Like in France, the fraud mix in Spain is unique. With just 3% of losses coming from CNP, Counterfeit and Lost and Stolen make up the vast bulk of fraud, together constituting roughly 80% of total fraud. The low CNP fraud numbers are the result of robust implementation of 3d-Secure technology in Spain and offer a lesson in the value of the Technology. There has been a chorus of criticism that 3d-Secure doesn’t work well, or drives away consumers, but the Spanish experience presents a formidable counterpoint to these claims. Furthermore, integration of artificial intelligence and analytic rule making are reducing the burden of 3d-Secure by selectively requiring its use based on a complex basket of conditions. This provides more precise targeting of potential problems improving both customer experience and fraud prevention. Will the United States ever adopt 3d-secure on a wide scale basis?
Similar to France and Italy, Spain is an early adopter of new data technology to help fight fraud. In the Case of Spain it is Confirma, a platform designed to reduce credit fraud that pretends to be legitimate requests for loans and credit cards. The system works by allowing the real time access to a database of shared credit origination data collected by the financial organizations. The system can flag suspicious credit card applications and help protect consumers from ID Fraud.
If the US Follows the Fraud Path of the UKIf the United States were to follow the post EMV fraud path of the UK then in 2022, the US will have fraud totaling just $7.2 Billion. This will have dropped from a high of 11.31 Billion in 2017, just two years after the EMV liability shift occurred. There are many parallels to the UK, for instance, both had already high levels of fraud before EMV liability shift occurred. Like in the UK, merchants in the United States err on the side of positive customer experience over disrupting check-out processes to verify customer identity. They want to make check out easy with the hopes that profit from extra sales can pay for any increase in fraud. However, times are changing and fraud prevention techniques are smarter and less invasive now than they were when the UK adopted EMV.
As is the pattern with all countries, EMV chip & PIN fraud strategies have evolved to be both more sophisticated and blunt. One result that seems unique was a resurgence in good old fashioned pick-pocketing. There was a steady decline in card theft for 5 years after the UK adopted EMV, but then a small, but sudden upswing occurred. The reasoning behind the uptick is, if you can’t break the lock, then take the whole safe. In this case the safe is your pin plus your card. The best way to get your pin is to watch you put it in an ATM or skimming info. The best way to get your card is to create ruse and steal it. When tricksters have both pieces of information – a pin number and your card – they are free to make purchases without considerable oversight – or at least until you notice what is going on. Another bold practice is for fraudsters to pretend like they are a police officer or representative of the fraud unit of your bank. They make claims of needing to secure your information by asking you to verify it.
The United States is like the UK in both payment network makeup, market maturity and emphasis on customer experience. Both nations utilize major brands such as Visa and MasterCard with no significant counterpart to iDeal in the Netherlands. Furthermore, like the United Kingdom in the years after EMV Chip & Pin, the United States is still leery of abandoned shopping carts and hesitant to implement blunt force tools to combat fraud. Unlike in the UK after they adopted EMV in 2006, today’s market has more intelligent fraud detection technology that selectively authenticates consumer information without unduly block legitimate transactions. In addition to improvements in consumer authentication, the US could more widely adopt new technology being deployed in the UK, like communicating with the customer in real time when a transaction triggers a fraud alert.
If the US Follows the Post EMV Shift Fraud Path of the ItalyItaly gets good marks low amount of fraud on total credit card spending, coming in at a respectable 2% compared to around 7% in the UK and France. However, if the United States experiences the same growth in card-not-present fraud as Italy, we will be in for a collective sigh of disbelief. If the United States follows the post EMV fraud path of Italy then the US will see fraud peak around $93.82 Billion 2019, with a dip to around $88.7 Billion per year in 2022. By comparison, in 2015 the US had $3.5 Billion in card-not-present fraud. If we follow the path of Italy, we will jump to nearly $88.4 Billion in losses in just 3 years. This eye-popping number should give us pause to reflect on if we want to transfer that much cash to criminals? And if not, what do we do?
Luckily, there is good reason to believe these sorts of increases won’t happen in the United States. First, when the EMV standard was implemented in 2006, CNP fraud in Italy was low at only 2% of total fraud. This initial low percentage of CNP fraud coupled to the sudden and rapid growth of ecommerce created fertile ground for criminals who were being pushed out of other countries with stronger safe guards. In the United States, projections for fraud range as high as $10 Billion for CNP fraud in 2018, so if we were to reach the crazy CNP fraud growth of Italy after they adopted EMV Chip & Pin.
Are there any lessons or innovations the United States can borrow from Italy? Similar to Spain and France, Italy recently created the Computerized System for the Administrative Prevention of Fraud, which allows the real time sharing of data between card issuers and card accepting entities, so they can compare current purchases to a historical record of businesses and transactions that are suspicious and have been flagged for potential abuse.
If the US Follows the Post EMV Fraud Path of RussiaIf the United States were to follow the post EMV fraud path of Russia then in 2022, the US will have fraud totaling a whopping $91.48 Billion, most of the increase comes in the form of card-not-present fraud, with counterfeit cards a close second. This represents a 1000% increase in fraud over the next 6 years. To be sure there are many differences between the US and Russian market that may prevent the US from ever reaching this level of fraud. First, Russia instituted EMV cards while they were still a predominately cash driven nation. The Central Bank of Russia has released figures showing that in 2013 83% of card transactions involve cash withdrawals, with direct card payments for goods and services at just 17%.
The United States on the other hand has a very mature credit card market, with world leading fraud rates. Secondly, even though the Growth of Fraud is large, total numbers in Russia are still low, mainly due to effective fraud measures such as payment verification via mobile messages. Visa reports just 1/10th of the fraud losses in Russia when compared to the global average.
There has also been positive news for consumers in Russia’s laws governing liability for fraud. Traditionally, if Russian banks suspected customers were involved in fraud, it was up to the customer to go to court and prove their innocence. This was buttressed by a forty-day period banks had to investigate the fraud and create a case against the victim. This all changed in 2013 with a new law that requires banks to return stolen funds to victims within 24 hours.
As Russians continue to adopt electronic forms of payments, they should stay ahead of the problem and invest in the best-practice fraud prevention solutions and strategies. With implementations times averaging six to eight months, this is a problem that could get away from them very quickly. If they delay and fraud increases, it will almost certainly cost more than implementing best-in-class fraud prevention.
If the US Follows the Post EMV Fraud Path of the PolandIf the United States were to follow the post EMV fraud path of Poland then the US will see fraud peak at around $19.45 Billion per year in 2018, and then fall to roughly 11.7 Billion dollars. Unlike countries such as the Netherlands and Germany, Poland utilizes the same payment networks as the United States and in roughly the same numbers. Poland has received high marks for keeping fraud low and responding robust security measures when things started to get out of hand. The EMV shift seemed to put a large dent in Lost & Stolen and counterfeit card fraud, which went from 72% of total fraud to just over half.
In 2012, 18% of Polish citizens polled said that they had experienced fraud. This is compared to a whopping 42% in the United States. Part of this can be explained by the lack of EMV Chip & Pin cards, part of it can be explained by a larger ecommerce segment in the US, and the final part is a general lack of focus on fraud in the United States. The 2013 Visa fraud index showed that fraud accounted for only 0.4% of total purchases in Poland, 1/10th the European average of 4%.
If the US Follows the Post EMV Shift Fraud Path of SwedenIf the United States were to follow the post EMV fraud path of Sweden then in 2022, the US will have fraud totaling $10.76 Billion, most of the increase comes in the form of Card-Not-Present fraud.
Like the Netherlands, Sweden is known to have some of the lowest fraud rates in Europe. However, unlike the Netherlands, Sweden has a higher percentage of credit card transactions, with MasterCard and Visa leading the pack. In fact, Sweden has recently been touted as the most cashless country on the planet, with less than 2% of transactions involving cash. Busses haven’t accepted cash payments for years and churches accept credit cards for tithing. It was considered a risky proposition, even in this innovative nation with widespread equality and technology adoption, to promote the use of mobile card readers by Street vendors (sometimes homeless) to accept payments for purchases of low cost items like Magazines and Newspapers. But it turned into a boon for a segment thirsty for revenue in a society that carried cards not cash. Despite the dispersed and ubiquitous acceptance of electronic payments, Sweden has low fraud rates that rival the Netherlands, and only 60% of of the fraud that its neighbor Norway reports.
A notable differentiation in the Swedish market is the emphasis on customer experience and safety. Much of the conversations around credit card fraud revolve around the tension between customer experience and stopping tricksters in their tracks. Sweden appears to be tackling this conflict head on.