Chip cards bring new fraud trends

When credit card companies began rolling out chip cards in earnest in 2015, the industry could generally predict how it would impact different types of card fraud. But that doesn’t mean the actual numbers we see now aren’t still dramatic.

Chip card implementation surged in 2015, ahead of an industry-wide deadline of October 1 of that year, after which point merchants were on the hook for in-store fraud if they had not upgraded to a chip-enabled payment system. But chip card rollouts continued at a strong pace for the coming year, peaking in 2016.

What we can see in fraud trends over time, with data tracked by Aite Group, is that losses from counterfeit, stolen and lost cards also peaked in 2016, hitting a high-water mark of $5.4 billion that year. At the same time, card-not-present fraud – which occurs mostly during online and mobile transactions, in which consumers do not physically present their credit card to the merchant – had steadily ticked up over several years, sitting at $3.3 billion in 2016.

Preliminary data for 2017, however, are where the dramatic reversal begins. With fraudsters deterred by chip-enabled terminals at more brick-and-mortar merchants, card-present fraud losses plunged almost 28 percent in 2017, to $3.9 billion.

In the meantime, fraudsters predictably shifted their efforts to online fraud, to make up for the increasingly closed doors on physical transactions, and the card-not-present losses estimated for 2017 bear that out. In fact, card-not-present losses in 2017 are expected to surpass card-present losses for the first time.

Aite Group also forecasts what it expects to see in 2018 losses, with card-not-present fraud continuing a strong upward trend, with card-present fraud sinking.

Research and advisory firm Aite Group regularly tracks and publishes credit card fraud data in a variety of reports. The data in this graphic was updated in April and released in June.

See related: Online fraud surges after EMV chip cards hit the U.S., Chip card delay at gas pumps extends skimming fraud, More infographics

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