The United States has finally joined the rest of the G-20 countries in upgrading to the EMV standard, though the path has certainly been a rocky one. At the same time that EMV gradually works its way into the fabric of U.S. payments, financial fraud continues to increase. Account takeover (ATO), card-not-present (CNP) fraud, and application fraud are all rapidly rising, fueled by reams of data breaches that have given criminals vast stores of consumer data. Lessons learned from countries that preceded the United States in upgrading to EMV indicate that as the U.S. migration progresses, dwindling counterfeit card opportunity will further magnify the increases in other forms of fraud. This on-demand webinar, based on fresh research from Aite Group, explores the current state of the U.S. EMV migration, and the associated account takeover, CNP fraud, and application fraud trends. The research will help executives benchmark EMV’s progress and better understand the rapidly shifting fraud landscape.

1. WEBINAR
EIGHT MONTHS OF EMV
EARLY FRAUD SHIFTS AND TRAJECTORY
JUNE 2016

2. 2
The transition to EMV card
types will drive major
changes in consumer
behavior, in infrastructure and
liablility, and in fraud
patterns.
How do experiences in other
countries help us prepare
for these shifts?

3. 3
JU LIE C ON R OY
R E S E A R C H D I R E C T O R
 Head of Aite Group’s Retail Banking & Payments practice, covering
fraud, data security, anti-money laundering, and compliance.
 VP-level product management roles in financial services, risk
management and payment processing.
MICHAEL THELANDER
P R O D U C T M A R K E T I N G M A N A G E R , A U T H E N T I C A T I O N
 Manages go-to-market, launch and customer education activities for
iovation’s authentication products.
 20 years in VP- and director-level product management and product
marketing roles for information security companies.

4. 4
AGENDA
1
2
3
4
WHY & WHAT
Understanding EMV transition
Goals and desired outcomes
LESSONS LEARNED
Experiences in other countries
Fraud trends and directions
EXPECT THE EXPECTED What will we see in the U.S.?
HOW TO PREPARE
What tools are at your disposal
What’s next for card-not-present fraud?

5. WHY & WHAT
WHAT PROBLEM IS EMV SUPPOSED TO
SOLVE?

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WHY EMV?
P R O B L E M S S O L V E D B Y E M V C A R D S A N D T E R M I N A L S
EMV cards (EMV stands for “Europay”, “MasterCard” and “Visa”) add a chip
that makes it virtually impossible to use a counterfeit card
Business who use EMV cards throughout their payment process will not be
liable for purchases on lost, stolen or counterfeit cards
The verification data embedded on the chip includes a continually changing
algorithm that makes it easier to detect or deny stolen cards
Like around one-third of the EMV deployments in the world, the U.S. is
primarily chip-and-signature, since lost/stolen fraud is relatively minor in the
U.S. market

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PROGRESS IN TRANSITION
8 1 % O F C R E D I T C A R D S , 5 7 % O F D E B I T

8. 8
PROGRESS IN TRANSITION
9 4 % O F C R E D I T C A R D D O L L A R S , 7 2 % O F D E B I T D O L L A R S

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10. LESSONS LEARNED
“THOSE WHO DON’T REMEMBER THE PAST … REPEAT
IT.”

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CNP LESSONS FROM THE U.K.
“ S Q U E E Z I N G T H E B A L L O O N ”
From 2012 to 2015
counterfeit fraud
increased marginally, by
less than 7%
But at the same time
Card-Not-Present fraud
increased by over 60%

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CNP LESSONS, CANADA & AUSTRALIA
“ S Q U E E Z I N G T H E B A L L O O N ”
From 2012 to 2014,
Canada saw a $91
million increase in CNP
fraud – more than 33%
Australia’s transition was
similar, with 60% more
CNP fraud and a $117M
increase in losses

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TWO TYPES OF CARD -LESS FRAUD
A C C O U N T T A K E O V E R
Criminals fish for info, pretend to
be the cardholder, and then
request a replacement card
CARD-BASED ATO
Access a legitimate account
through hacking or fraud, and
transfer funds to another account
ONLINE BANKING ATO

14. 14
ACCOUNT TAKEOVER IN THE U.K.
“ S Q U E E Z I N G T H E B A L L O O N ”
From 2012 to 2015, the
U.K. saw a £1M
decrease in card-based
ATO
While online-based
account takeover
increased £61M, or
250%

15. EXPECT THE
EXPECTEDPROJECTING THE IMPACT OF EMV ROLLOUT IN THE
U.S.

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PROJECTED IMPACTS IN THE U.S.
E S T I M A T I N G U . S . C O U N T E R F E I T C A R D L O S S E S
Stem the sharp increase
that was seen from 2012
through 2015
Begin a precipitous
decline in counterfeit
fraud activity

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PROJECTED IMPACTS IN THE U.S.
A C C O U N T T A K E O V E R L O S S E S T H R O U G H 2 0 2 0
Expect a $330 million
increase in U.S. account
takeover losses

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PROJECTED IMPACTS IN THE U.S.
“ S Q U E E Z I N G T H E B A L L O O N ”
But worse a potentially
disastrous increase in
CNP fraud
CNP fraud is projected
to see a 80% increase
over the next 4+ years

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A word about
cyber criminals

21. 21
Fraud Inc.

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ORGANIZED CRIME RINGS ARE QUICK TO FIND
GAPS
N I M B L E A N D E A G E R T O A D A P T

23. HOW TO PREPARE
WHAT TO DO, AND THE FUTURE OF CNP FRAUD

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FIGHTING CNP FRAUD
8 T O O L S A T Y O U R D I S P O S A L
Device fingerprinting and digital identity
Behavioral analytics & behavioral
biometrics
Malware detection
Mobile operator data
Knowledge Based Authentication (KBA)
Out-of-Band Authentication
Transaction Signing
Biometrics

25. 25
Device fingerprinting and digital identity
FIGHTING CNP FRAUD
8 T O O L S A T Y O U R D I S P O S A L
Behavioral analytics & behavioral
biometrics
Malware detection
Mobile operator data
Knowledge Based Authentication (KBA)
Out-of-Band Authentication
Transaction Signing
Biometrics
LOW FRICTION
LOW FRICTION
LOW FRICTION
LOW FRICTION
HIGH FRICTION
HIGH FRICTION
HIGH FRICTION
HIGH FRICTION

26. 26
HISTORICAL
REPUTATION
ANOMALOUS
BEHAVIOR SECURITY RISK
INDICATORS
AUTHORIZED
FOR ACCOUNT
LINKS AND
ASSOCIATIONS
CUSTOMER
AUTHENTICATION
THE GOOD NEWS: YOU ALREADY HAVE THE TOOLS
FRAUD
PREVENTION

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ACCOUNT
LOGIN
CHANGE
ACCOUNT DETAILS
CHECK
BALANCE
WITHDRAWAL,
FUND TRANSFER
THE GOOD NEWS: YOU ALREADY HAVE THE TOOLS
LOAN ORIGINATION
OR
ACCOUNT CREATION
CHECK BALANCE,
DEPOSIT
MAKE
PAYMENTS
CUSTOMER
AUTHENTICATION
FRAUD
PREVENTION
FRAUD
PREVENTION

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RECOMMENDATIONS
FOR ISSUERS FOR MERCHANTS
INVEST IN
SOLUTIONS
ACCELERATE
BOLSTER CNP
CONTROLS
BEWARE OF
ATM ATTACKS EDUCATE
PRIORITIZE
RETERMINALIZATION

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THE EVOLUTION OF FRAUD, INC?
8400 miles, 1600 forged cards, 1400 transactions, $13 million …..
… in less than three hours.

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THE EVOLUTION OF FRAUD, INC?
8400 miles, 1600 forged cards, 1400 transactions, $13 million …..
… in less than three hours.

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G O T O W W W . I O V A T I O N . C O M / R E S O U R C E S
RESOURCES
“AUTHENTITHINGS” WEBINAR
A review of the overall state of
authentication in consumer-oriented,
“Internet-of-Things” technologies.
AITE REPORT ON EMV TRANSITION
The full report on EMV migration and the
impact of shrinking counterfeit card
opportunity on other forms of fraud.

32. Q&A