For years, analysts and banking experts have been predicting that countries that move to EMV would likely see a decrease in card fraud; as a result, card fraud would migrate to areas that still maintain mag stripe technology.
The former part of these predictions seems to be true. The UK Cards Association (March 2010) said this about fraud in the United Kingdom since it implemented EMV:
“Fraud on lost and stolen cards is now at its lowest level for two decades and counterfeit card fraud losses have also fallen and are at their lowest level since 1999. Losses at U.K. retailers have fallen by 67 per cent since 2004; lost and stolen card fraud fell by 58 per cent between 2004 and 2009; and mail non-receipt fraud has fallen by 91 per cent since 2004.”
Unfortunately, the latter part of the predictions seems to be coming true, too. Europol, the European Union’s police organization, recently shut down a major debit card fraud ring believed to have stolen euro50 million ($70 million) from bank accounts around the world. While overseas fraud continues to decrease, based on the implementation of EMV cards, the United States by far exceeds other countries due to the lack of chip and pin technology. (See graph from the Financial Fraud Action in the UK)
The gang, focused in Bulgaria but with cells in Italy, Spain, Poland and the United States, used sophisticated skimming devices to copy personal information from debit cards. They used the details to create clones with magnetic stripe cards, which can easily be used in non-EMV-compliant areas like the United States. They need magnetic stripe cards because EMV cards are extremely difficult, if not impossible, to counterfeit. The United States continues to be a high target for hackers due to this. (see graph)
In a story on Finextra.com, Rob Wainwright, director of Europol, said this about the ring:
“This investigation has given us a unique insight into the ‘skimming phenomenon.’ It highlights the fact that illegal credit card transactions outside the EU are a major part of the problem, and that as long as cards have magnetic strips they will be vulnerable to skimming.”
The major takeaway from this news is stated plainly in the last part of Wainwright’s quote: as long as magnetic stripe cards exist, so will skimming and card fraud. In the United States, some banks have already started issuing EMV-compliant cards, but hopefully the fraud problem won’t have to get worse before the entire U.S. banking industry gets fully on board with EMV.