28 September 2015

What do we want? EMV! Where do we want it? Over there!


The US record for fraudulent card transactions is nothing to envy, and it affects other countries too, says Gareth Lodge. Bring on EMV.

In my last post, I talked about the experience of using my credit card in the US, and how inconsistent it feels. Some of it was undoubtedly tied to security – using photo ID or entering zip codes – though I’m far from convinced that they provided any security at all.

In some conversations we’ve had, there has been a feeling that US fraud is actually manageable at an industry level – a belief that they are in line with (or better than) many other countries. Yet, recent figures from Nilson seem to paint a very different picture.

While accounting for 21.4% (or $6.187tn) of total volume last year, the US accounted for 48.2% (or $7.86bn) of gross losses worldwide on plastic cards.

My Celent colleague and fellow BankNXT contributor Zilvinas Bareisis has, and will, discuss the implementation of EMV at length with anyone, so I won’t discuss that here. What struck me was how ineffective the checks were. As a consumer (rather than a payments geek), it struck me that …

  • … asking for a zip code as authorization seems pointless. If I’ve stolen a purse or wallet with cards in, I’m likely to have either the zip code already or have enough info to find it within seconds on the internet.
  • … asking for a signature, yet not even checking it, seems odd. Perhaps I have an honest face, or perhaps the risk didn’t warrant the effort.
  • … having photo ID, at least for non-US, seems pointless. How many people can spot fake ID, or know what a Latvian national ID card looks like, for instance?

Another thought that strikes me is that the figures probably hide other issues, too. Traditionally, a third of UK card fraud takes place overseas (in 2014, £150m of £479m), and given that most other countries have EMV, of that, the majority takes place in the US (it has been ranked the country with the highest losses every year for as long as I can find records for. I suspect the figure above doesn’t include this).

The volume of fraud, then, that could be cut by EMV in the US would seem to be even higher. While I know it’s not that simple, the US ‘accounts’ for over 5% of UK card fraud. Full EMV in the US wouldn’t reduced this to zero, but equally, even if it halved it in the top 10 countries that lose most to the US, the reduction in fraud would easily be in excess of £100m a year.

Visitors to the US aren’t just wanting the experience to improve, they’re wanting to stop paying for fraud that takes place in the US as well.


Originally posted on BankNXT and reproduced with kind permission of the author and BankNXT.

About the author

Gareth Lodge

Gareth Lodge is a senior analyst with Celent’s Banking practice and is based in the firm's London office. His research focuses on payments.

Leave a Reply

Your email address will not be published. Required fields are marked *