As a growing number of businesses and consumers across the U.S. are learning and adjusting to new EMV credit cards, many still question the impact EMV will have on protecting consumers and businesses from increasingly savvy and sophisticated criminal fraud rings. Join Experian and our panel of experts as we look at how businesses are faring one month into the EMV liability shift.

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Chipping Away at EMV Myths
November 2015

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Experian Public.
Today’s panel
Julie Conroy
Research Director of the Retail
Banking & Payments
Aite Group
David Britton
Vice President, Industry Solutions
Experian
Keir Breitenfeld
Vice President, Product Management
Experian Fraud & ID
Mike Klumpp
Director Fraud Prevention
Citibank N.A.

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Experian Public.
Glossary of terms
EMV: new credit cards with computer chips in addition to the
magnetic strips to help prevent POS fraud.
CNP: card not present is a payment card transaction made where
the cardholder does not physically present the card
NFC: Near field communication enables contactless payment
systems and allows mobile payments
POS: point of sale is the point at which a customer makes a
payment to the merchant in exchange for goods or services

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The last G-20 country to move to chip cards

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Myth #1:
October 1 will change everything

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The most fragmented and complex migration
Over 1 billion payment cards
12 million+ terminals
4 credit card networks
18 debit networks
12,000+ financial institutions

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Chip cards: coming soon
Source: Aite Group interviews with payment networks and 18 large U.S. issuers,
April to May 2014
0.4%
4%
25%
70%
91%
98%
2012 2013 e2014 e2015 e2016 e2017
Percentage of U.S. Credit Cards with EMV Capability
• 41% of debit cards by end of 2015
• Payment Security Task Force survey from May 2015 confirm projections are on track

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Where are issuers in the process?
Bank Timeline
Chase Already issued 29MM credit cards and 5MM debit cards
B of A Began credit card reissuance in 2014, debit card in October 2014
Fifth Third Reissuance underway will be complete 1Q 2016
Huntington Reissuance underway for debit and credit, will be complete in 2016
U.S. Bank Credit cards being reissued on expiry basis, debit card reissuance
began June 2015
Key Bank Will begin debit card issuance October 2015
PNC Bank Began May 2015 on expiry basis
Citizens Will begin 1Q 2016
M&T Bank Began debit card issuance June 2015, expiry basis
Sources: Cleveland Plain Dealer, July 31, 2015; Digital Transactions, June 2015; company
press releases

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Myth #2:
Subscription revenues will plummet
due to reissuances
Source:
Informationisbeautiful.net

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Merchant impact: Longer lines, unpleasant
November surprises
 Dip vs. swipe: Don’t
forget your card!
 Disparate debit and
credit user experience
 Front-line merchant
confusion Informal,
employee-to-
employee training
78%
A formal training
program for
operatingthe POS
system
16%
Don't know
6%
Q. Has/Will your company train employees about the changes in the
payment process because of the transition to EMV using ...? (AmongU.S.
retailers that have converted/plan to convert to EMV; n=168, data
weighted)
Source: Aite Group survey of 415 U.S. merchants,
September to October 2014

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Myth #3:
Card fraud will dramatically decline
$245.4
$199.6
$171.5
$152.6 $145.3
$111.5
$128.4
$140.4
$176.1
$259.5 $268.6
$299.4
2008 2009 2010 2011 2012 2013
Changes in Canadian Credit Card Fraud Losses, 2008 to 2013 (In millions
of CAD)
Source: Canadian Bankers Association

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Fraudsters will shift tactics
$4.3
$104.5
$31.3
$6.1
$88.4
$31.8
$8.5
$68.7
$49.6
$11.8
$52.8
$58.7
Fraudulent app Counterfeit domestic Counterfeit cross-border
Change in Canadian Credit Card Fraud Losses,
2010 to 2013 (In CA$ millions)
2010 2011 2012 2013
Source: Canadian Bankers Association

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EMV Will not assist online merchants
Merchants that serve “remote” or “Card Not Present (CNP)” channels will still be
completely liable for fraudulent purchases
Myth #4:
All liability moves to the issuer
≠

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Payments liability matrix
Least compliant party loses
EMV
POS
– Dip
Contactless
POS
Non-EMV
POS -
Swipe
CNP
Mobile
Wallet
Contactless
Mobile
Wallet
In-App
Alternates
(Square,
Paypal)
– Swipe
Alternates
(Square,
Paypal)
– Dip
EMV
Card
Non-EMV
Card
N/A N/A
Note: gas stations not liable until Oct 2017
EMV “dip” Mag-stripe “swipe”vs.

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Fraud moves upstream
Application, enrollment, account takeover
Fraudsters move upstream
• Apply for brand new cards
using stolen ID data
• Provision stolen cards into
mobile wallet
• Gain access to accounts to
make purchases
1233 2342 23423 2342
Daeeoab Berosu 08/16
Fraudsters blocked using
counterfeit cards at POS
Fraudsters use new cards
everywhere

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Overly tight controls damage online business
CNP is disproportionately impacted by fraud policy
Trans Dollars
CNP 9.60% 9.80%
POS 1.40% 3.00%
0%
2%
4%
6%
8%
10%
12%
Credit Declines
Trans Dollars
CNP 4.30% 5.60%
POS 0.30% 1.20%
0%
1%
2%
3%
4%
5%
6%
Debit Declines
CNP transactions declined at
5x – 15x the rate of POS transactions
CNP dollars declined at
3x – 5x the rate of POS dollars
CNP fraud losses approximately
2x POS fraud losses
Source: FICO Falcon Consortium / Banknet

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Impact of Draconian countermeasures – Issuers
Massive false-positive increase
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Credit declines YOY
CNP Credit Declines ($) Attack Rate ($)
Actual
attacking
traffic
“Suspected
fraud”
traffic
Example:
• $100M Annual
sales
• 20% YOY sales
growth
• 10% Increasing
YOY attack rate
(starting at 1.2%)
• 10% Increasing
decline rate
(starting at 9.8%)

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-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Volume Attack Rate Count Review/Reject Count
Impact if detection “falls behind” - Merchants
Significant negative impact on attack & review
Sales Volumes Review/Reject Volumes
Increasing
“gray area”
transactions
Increased rate of
attack on weak
targets
Example:
• 20% Growth in
volume
• 20% Increase in
attack rates
• “Only” 15%
growth in review
rate

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-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Volume Attack Rate Count Review/Reject Count
Volume growth with effective detection
Positive impact on attack & review
Decreasing
“gray area”
transactions
Fraudsters
decrease overall
rate of attacks
Example:
• 20% Growth in
volume
• -10% Decrease in
attack rates
• -25% Decreasing
review rate
Sales Volumes Review/Reject Volumes

20. 20©2015 Experian Information Solutions, Inc. All rights reserved.
Experian Public.
Today’s panel
Julie Conroy
Research Director of the Retail
Banking & Payments
Aite Group
David Britton
Vice President, Industry Solutions
Experian
Keir Breitenfeld
Vice President, Product Management
Experian Fraud & ID
Mike Klumpp
Director Fraud Prevention
Citibank N.A.

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Experian Public.
Experian Fraud & ID
Decision Analytics Community
@ExperianDA_NA
GROW – Securely expand digital channels and confidently
enter new markets.
RETAIN – Reduce customer friction, deepen and expand
customer relationships.
PROTECT – Reduce fraud losses, build trust and protect
corporate reputation.
COMPLY – Meet on-going regulatory and compliance
requirements.
We help build and protect trusted relationships

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Experian Public.
Aite Group: Partner, Advisor, Catalyst
Aite Group (pronounced eye-tay) is an independent research and
advisory firm focused on business, technology and regulatory issues and
their impact on the financial services industry.
Julie Conroy
Research Director
jconroy@aitegroup.com
+1.617.398.5045