EMV Fraud

January 18, 2022 | 7 min read

A Post-Liability Shift Guide to EMV Fraud Prevention

You’re probably familiar with EMV chip card technology at this stage in the payments game. The “chip” in question is that little gold microchip pressed into the front of your debit or credit card which relays your secured information to the payment processor. What exactly does it do, though?

There’s encryption technology built into every EMV-enabled card that is very difficult for fraudsters to hack and duplicate. The chip tokenizes payment information, rather than transmitting the cardholder’s actual data. This makes the EMV chip a much safer and more reliable means of transmitting payment information.

Using EMV technology is a valuable fraud prevention tactic. However, EMV fraud protection can't insulate merchants and cardholders against every type of fraud.

In this article, we’ll explain what EMV technology is and how it works. We’ll also look the strengths and weaknesses of EMV fraud prevention, and see where it fits into a broader strategy.

What is EMV Fraud Prevention Technology? How Does it Work?

EMV Fraud Prevention Technology

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EMV fraud prevention technology is a tool which uses tokenization to transmit one-time-use encrypted information in place of cardholder data. Because the cardholder’s data is never transmitted, it is much harder for hackers to intercept and steal it.

EMV fraud prevention technology is a product of EMVCo. This is an independent consortium drawing its name from the three card brands—Europay, Mastercard, and Visa—that first launched the technology. October 15th of 2021 marked the six-year anniversary of EMV implementation in the US, as well as the fraud liability shift which encouraged it.

EMV chip technology generates a unique token for each transaction, rather than transmitting the cardholder’s actual information. As a result, fraudsters are unable to skim cards and steal a cardholder’s identity. Plus, it’s much more difficult to create counterfeit cards that use chips.

The same tokenization technology behind EMV cards also works for payment methods using near-field communications (NFC) technology. This includes “tap-and-go” cards, plus mobile wallet apps like Apple Pay and Google Pay. When the customer scans a mobile device across the card reader, it transmits tokenized information, just like with a chip card.

This technology works beautifully in card-present transactions. As of 2019, Visa reported an 87% decrease in counterfeit card fraud since EMV was adopted. Things get a lot trickier when the card is not present, though. We’ll get into that more in the next section.

Effectiveness of EMV Fraud Protection

EMV technology certainly helps prevent many instances of in-person fraud. It is not ubiquitous, though. Given that most transactions are shifting toward eCommerce sources, EMV cannot protect a cardholder or merchant from everything.

EMV technology can:

Make it more difficult for fraudsters to counterfeit cardholder data.

Make in-person fraud and card theft
nearly impossible.

Protect user data stored in terminals and processors.

Help identify stolen or counterfeit cards.

EMV technology can’t:

Stop card numbers from
being stolen and used online.

Protect data from unauthorized
wifi access.

Protect data stored in merchant systems from online breaches.

Prove credentials for online purchases.

There’s no such thing as “foolproof” fraud prevention technology. The only real solution is a dynamic, multilayer approach.


Another thing to consider is that not all card-present merchants take advantage of EMV technology. Gas stations, for example, took significantly longer to migrate to the technology. As a result, incidents of fraud and chargebacks remain significantly higher in this industry compared to other verticals. Although the deadline to adhere to federal EMV mandates went into effect in April of 2021, many fueling and convenience stores are still not 100% compliant.

Greater adoption of EMV is an excellent deterrent against in-person and card-present fraud. But, like we mentioned earlier, it offers no real protection against card-not-present fraud outside of mobile wallet apps. And, it offers even less protection against chargebacks.

Is EMV Technology Driving CNP Fraud & Chargebacks?

As we’ve mentioned, EMV technology is highly effective at fighting in-person fraud. The chip technology embedded into every card is very difficult for fraudsters to hack or counterfeit. Even if the card has been physically stolen, using it without the necessary PIN code can be challenging.

eCommerce merchants, on the other hand, saw a significant surge in fraudulent activity following EMV adoption. In fact, the Federal Trade Commission found that card fraud activity more than doubled between the first quarter of 2019 and the first quarter of 2020. Most of that activity occurred online.

This phenomenon has a compounding effect. As card-not-present fraud becomes more rampant, cardholders grow more wary of online activity. They become more prone to filing chargebacks, which causes a spike in friendly fraud activity.

Criminal fraud incidents may become more common, but friendly fraud grows at an even faster rate. In fact, our data suggests that six out of every ten chargebacks filed by 2023 will be cases of friendly fraud. EMV fraud prevention technology didn’t “cause” this problem…but it has accelerated it.

EMV Fraud Prevention: Top 5 Best Practices

CNP fraud will only increase as time goes on. That’s why it’s important for online merchants to take precautions now. These include:

EMV Fraud

Use Multiple Anti-Fraud Tools: Merchants need a multilayer strategy. They should employ complementary tools like CVV verification, AVS, proxy piercing, geolocation, 3-D Secure 2.0, and more in a coordinated manner.

EMV Fraud

Deploy Fraud Scoring: Fraud scoring examines each transaction based on dozens of variables, then assigns the transaction a numeric score. Merchants can set parameters to automatically reject suspected fraud attempts, or flag them for manual screening.

EMV Fraud

Embracing Secure Technologies: Mobile wallets like Apple Pay employ two-factor security. Accepting and encouraging these alternate payment methods can make for more secure, reliable card-not-present transactions.

EMV Fraud

Eliminating Potential Errors: We’ve identified more than 100 simple missteps in customer service, user experience, policies, and logistics. These common practices can lead to increased chargeback issuances and customer dissatisfaction, all while offering no fraud prevention benefits.

EMV Fraud

Merchants can’t fight fraud without reliable data: Friendly fraud skews data, making it impossible to identify genuine fraud. Merchants need to identify and respond to friendly fraud through representment, and take steps to mitigate long-term friendly fraud risk factors.

That last point is especially important. As we addressed earlier, friendly fraud is a fast-growing problem; one that EMV fraud protections are useless to prevent. The reason for this has to do with the ‘gray area’ factor. Banks have an incentive to keep cardholders happy, and so are disinclined to push back against their customers over plausible disputes.

So, how can merchants use EMV to combat CNP and friendly fraud? Implement a strategy that combines every fraud prevention method possible…that’s how.

Fraud Protection That Works

The market has changed dramatically over the last six-plus years. EMV adoption has helped protect consumers and merchants operating in the card-present space. However, it hasn’t prevented fraud, so much as it’s simply moved it online.

Card-not-present merchants are facing most of the fraud burden. So, while chip cards are great, there’s still plenty more work to do, both online and off.

Want to learn how merchants can better implement EMV and NFC technologies into a dynamic fraud prevention plan that eliminates fraud without causing more chargebacks or false declines? Continue below and speak with the experts today.

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