Independent Banker - June 2018 - 30

PORTFOLIO
percent in September 2017 compared
to December 2015 at physical retailers
that accept chip cards.
But rather than give up, criminals
have done what they always do.
They've moved on to easier targets.
In particular, card-not-present (CNP)
transactions, where chips have little
impact on security.
According to the 2017 Financial
Institution Payments Fraud Mitigation
Survey from the Federal Reserve
Bank of Minneapolis, released earlier
this year, three out of four banks
experienced fraud losses in 2016.
Almost all debit card issuers (96 percent)
faced card fraud losses. And 63
percent of banks reported increased
fraud loss for debit cards in 2016
compared to 2015.
Why all the card fraud despite
the fast-growing acceptance of chip
cards? And what can community
banks do about it?
Card fraud's
shifting risks
Payments
As EMV chip cards decimate fraud at physical points of
sale, criminals have online retail in their sights. What can
community banks do to help their merchants and cardholders beat back
the growing threat of card-not-present fraud? By Karen Epper Hoffman
t's a truism of criminal activity of all kinds: If you put stronger locks on the
door, thieves will just start coming in through the window instead.
So it is with card fraud. U.S. banks have moved the majority of their credit
and debit cards from magnetic stripe to the more secure EMV (Europay-Mastercard-Visa)
chip over the past five years. Nine out of 10 cards are predicted to
have chips by 2020, according to the Federal Reserve System.
This has cut fraud at brick-and-mortar stores' points-of-sale (POS): Visa
reports that in the U.S., counterfeit card fraud has decreased a whopping 70
28 Q ICBA Independent Banker Q June 2018
I
Canaries in the coal mine
This pattern has been seen before.
After the United Kingdom introduced
EMV chip cards in 2001, card-present
fraud dropped by roughly 27 percent
between 2007 and 2012, according
to a white paper, The U.S. EMV
Chip Card Migration: Considerations
for Card Issuers, written by Mary J.
Hughes, senior payments consultant
at the Federal Reserve Bank
of Minneapolis.
The white paper looked to other
countries' experiences when assessing
likely outcomes of the U.S. chip card
adoption. In the white paper, Hughes
pointed out that several countries
had a " spike in CNP fraud when chip
cards were introduced because fraud
perpetrators turned their attention
from card-present counterfeit fraud
to the more vulnerable CNP channel.
The experience in the U.S. will likely
be the same. "
Many community banks are see

Independent Banker - June 2018

Table of Contents for the Digital Edition of Independent Banker - June 2018

Table of Contents
Independent Banker - June 2018 - Intro
Independent Banker - June 2018 - Cover1
Independent Banker - June 2018 - Cover2
Independent Banker - June 2018 - Table of Contents
Independent Banker - June 2018 - 2
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