Recent statistics from the European Central Bank (ECB) reveal that fraud in the Single Euro Payments Area fell 7.6% between 2007 and 2011, despite growing card usage in this region. This decline is underpinned by a slowdown in the growth of ATM fraud as well as a 24% drop in fraud carried out at Point of Sale (POS) terminals. The move away from the conventional mag-stripe standard to EMV-chip enabled cards has had a positive impact in countries which have adopted the standard. However, the data confirms that it will be near impossible to tackle payment fraud on a global scale while regional ‘loopholes’ exist.
Rollout rates of the EMV standard across the globe have been staggered since EMVCo published its first version of the EMV specifications in 1996. This is due to the scale of the migration project, which demands a complete overhaul of the existing payments ecosystem in each country. Every single terminal must be modified or replaced, and banks must re-issue every credit and debit card.
It’s understandable that this process has taken longer to coordinate in larger countries such as the U.S., which have a particularly complex payment value chain to coordinate. However, countries which have yet to migrate to the standard have suffered at the hands of fraudsters who are adept at seeking out and exploiting security weaknesses.
The ECB data reflects the phenomenon of fraud migration away from EMV mature markets. In 2011, 78% of total fraud with counterfeited cards was carried out in non-Sepa countries, up from 61% in 2010. This pattern is reflected in an April 2012 report from the European ATM Security Team. The research shows an increase in the number of ‘skimmers’ attached to ATMs and other terminals across five European countries. Of course, these counterfeit cards are unusable in EMV ready countries, so fraudsters shift to markets which still operate with the mag-stripe standard to complete the fraudulent transactions. This is evidenced by statistics which report a corresponding rise in ATM fraud through skimmed cards across the U.S. – FICO’s Payment Card Fraud and Skimming Map of USA.
Card skimming is a low-tech deception crime, though one which will continue to represent a fruitful hunting ground for fraudsters as long as regional vulnerabilities remain. Technology has developed to the point where the payment chain is truly global. To successfully combat fraud at this level, the industry must collaborate with a synchronised, cross-border approach to EMV migration. Only then will we ensure that criminal activity is eradicated rather than relocated.