Transaction Trends

Following the October 2015 liability shift and transition to EMV chip-enabled cards, counterfeit activity fell 18 percent in the first quarter of 2016, according to new data from Auriemma Consulting Group (ACG). A wave of high-profile data compromises had led to a significant increase in counterfeit activity over the past several years, but counterfeit fraud fell to its lowest level since early 2013 in the first three months of this year.

Counterfeit fraud losses have declined steadily relative to other categories since the industry’s EMV liability shift took effect late last year, and have decreased by nearly one-fourth since their peak in late 2014, according to ACG.

“The EMV migration has reached an inflection point for card issuers,” says Ira Goldman, who leads ACG’s line of fraud control executive groups. “Chip card technology, coupled with normalization of fraud in the wake of major national breaches, is beginning to have a major impact.”

The switch to the EMV standard was enacted, in part, to help protect against counterfeit card use at point-of-sale systems. These cards now account for 66 percent of credit cards in circulation—and more than 80 percent of cardholder spending, according to ACG data.

As counterfeit fraud decreases, criminals are shifting to other methods of attack. Incidences of identity theft, fraudulent applications, and lost/stolen cards are increasing in frequency and levels of financial loss, reports ACG. In fact, card-not-present activity (online and mobile fraud) has increased 12 percent, and account takeover, a form of identity theft conducted using social engineering tactics, has risen 37 percent year-over-year, according to ACG. “These shifts in the distribution of fraud were expected, but the magnitude of change is somewhat surprising,” Goldman says.

Many companies are taking preventative measures to combat emerging threats, including adding extra layers of protection and one-time passcodes, to make online purchases safer. Card issuers also have implemented more sophisticated risk-scoring models, new fraud rules, and identity authentication technologies, including voice biometrics, to detect and prevent account takeover and other attacks.