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Changing Card Technologies Lead to Different Kinds of Credit Fraud

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In recent months, a lot of attention has been paid to efforts by lenders and payment processors to push new types of more secure credit cards, but some experts say the kind of fraud popular today will simply shift to the new technology.

Many of the world’s top lenders and payment processors are now pushing for adoption of what is known as EMV technology for credit cards issued in the U.S., according to a report from the credit scoring bureau FICO. American Express recently joined Visa and MasterCard – the world’s two biggest payment processors – in pushing out a new EMV roadmap that will get all cards they issue to carry the technology within the next few years.

EMV is sometimes known as “chip-and-PIN” technology, and that explains exactly what the cards are designed to do, and how they differ from traditional credit and debit cards. Instead of storing the associated account data on a magnetic strip located on the back of the card, it is kept on a microchip embedded in it, and then, instead of signing to make a purchase, consumers are asked to enter a PIN code.

However, the problem with this is that hackers will likely figure out new ways to commit fraud on the newer card technology, safer though it may be, the report said. The most common type of credit card crime in the U.S. today is known as point-of-sale fraud, meaning that a criminal personally uses the card to make a purchase with someone else’s account. However, past experience in Europe – where EMV technology has been the norm for years – is that as POS fraud goes away, it is replaced by card-not-present fraud, which includes purchases made online.

In the Eurozone, CNP fraud costs companies 30 to 40 percent more than it does for companies in the U.S., the report said. An uptick in this type of crime may be a bigger problem for companies all throughout the purchasing system because it is far more difficult to trace and somewhat easier to commit.

Experts also note, though, that current magnetic strip technology makes it fairly easy to copy payment data stored on cards, which is far more difficult on EMV accounts.

Image: oskay, via Flickr

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