Community Service with the Personal Touch

September 23, 2014
/   Insights

Question: Community branch, personal service, mobile banking—which is the odd one out? Answer: None. Otherwise, the industry is in trouble. For some time now, there have been discussions about the future of community banks...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Mobile Banking Engagement: Data from Digital Insight

June 24, 2013
/   Spotlight

Intuit Financial Services has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several...

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Social Banking: Blessing or Curse?

August 1, 2012
/   Insights

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion...

This post originally appeared on Alaric’s blog.

The EMV roll-out in the US is building speed at long last. It’s been a long bumpy road to get to where we are today, and there is fair bit to go yet. Given all the effort so far it’s important that EMV has the desired effect; to reduce fraud.

But just how will the change impact card fraud as EMV is rolled out across the US? We recently looked at this issue in a whitepaper entitled EMV in the US – how far have we come and where are we going?

Where are we?

A recent report from EMVCo shows a sharp rise in the cards worldwide. There were 2.37 billion EMV payment cards globally, excluding the US, by the end of 2013, up from 1.62 billion 12 months prior.

But so far virtually nothing in the US. However, as the whitepaper shows, things are turning around. From October 2015 the liability for domestic and cross-border card-present transactions will shift to merchants. “The party that is the cause of a chip transaction not being conducted (either the issuer or the merchant’s acquirer or acquirer processor) will be held financially liable for any resulting card-present counterfeit fraud losses,” says Visa. In other words it will be merchants who have to foot the bill if they do not have a suitable terminal for the EMV card.

Jane E. Cloninger, partner at Edgar, Dunn & Company, tells us there is now “very little now to suggest that the timetable for implementation will be blown off course”. A recent Javelin Strategy & Research report suggested the US would achieve EMV “parity” with the rest of the world by 2018.

So if EMV in the US is a done deal, what will the effect be? How will it impact fraud?

Let’s look again at where we are. Right now more than 90 per cent of fraudulent transactions in the US used credit, debit or prepaid cards. Fraud on plastic cards costs more than ACH or check/cheque fraud. The Nilson Report reckons losses for the US payments industry from card fraud could hit $10 billion a year by 2015.

EMV will change the landscape. It will direct fraud away from the card-present sphere just as we have seen happen in other markets where the standard has been adopted. But this time we won’t see the same increase in cross-border fraud. Instead, card-not-present payments, identity theft, internet banking and corporate payments will be targeted.

As the whitepaper point outs, this means it becomes “critically important” for payment service providers, independent sales organisations, processors and acquirers to ensure they have effective fraud detection systems that can protect all channels, all accounts and all payment types from a single platform.

The fact is that EMV doesn’t eliminate fraud; it fragments it. This can be a challenge for organisations that have legacy systems that cannot adapt to the changed environment.

Even in the card present area we can’t expect the EMV wand to eradicate fraud as if by magic. Figures from Visa on EMV transition in other markets indicate merchants can be slow to get ready. If past experience is anything to go by we can expect just 50 per cent of US merchants to be prepared for the liability shift when it happens.

So EMV is not a silver bullet to fix all our payment fraud worries. Some people have even wondered if it’s worth skipping out EMV altogether to focus on new technology that could cut fraud losses. However, I’m certain that without EMV card fraud losses would be significantly higher.

For now I can’t see any point in hanging around to see what happens. Late adopters to EMV will be easy prey for criminals; whether you’re a financial institution or merchant, don’t be the one who’s left with the check at the end of the party.

To learn more, check out NCR and BAI’s webinar on Changing the Game in Fraud Detection.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp