Why CNP fraud will be an operational game-changer
The US EMV migration made moderate progress in 2015, as card issuers are still distributing new chip-enabled cards, and many merchants held off on point-of-sale conversion before the busy holiday shopping season. But the we know that things are progressing, and as migration and adoption accelerate throughout 2016, an increase in Card Not Present fraud is inevitable.
EMV shifts caused considerable spikes in CNP fraud in Canada and Europe more than a decade ago when mobile shopping didn’t even exist, and the ramifications for the U.S. are expected to be enormous. Adobe reports that $799 million of online spending is coming from a smartphone or tablet, which significantly contributes to the rise of CNP transactions. Furthermore, MediaPro reports that CNP fraudulent payments are expected to increase 106% or by $3.3 billion.
What does this mean for card issuers?
For many, it’s unchartered territory in this post-EMV world, as issuers plan for more frequent card reissuance and experience great risk.
Have you updated your service level agreements to match your card production needs and reduce your risk? Take the assessment to learn more.
To further plan for the inevitable, issuers need to consider three essential risk-management strategies.
Modernize Your Business Continuity and Disaster Recovery Plan.
The traditional business continuity and disaster recovery plan requires an issuer to have back-up inventory for each card program they manage. As markets grow and CNP fraud increases, the cost of these programs is unsustainable. Traditional manufacturing means 100 percent sunk costs, with zero flexibility.
Do you have delivery guarantees in place in the event of a major card replacement? Assess your risk with 7 simple questions.
A more modern approach to a business continuity and disaster recovery plan, issuers should invest in virtual – or on-demand – inventory. Plan ahead, set up program elements in advance, negotiate good service level agreements and be ready to pull the trigger on replacement cards in days, not weeks.
Diversify, Diversify, Diversify.
Card issuers are accustomed to using one personalization facility, which almost guarantees significant lag times to reissue cards for a sizable breach.
Issuers today are in an especially risky situation because traditional manufacturers are still producing first run EMV cards for a large population of mag stripe cards that have not converted. A breach significantly will quickly exacerbate the situation and issuers find themselves in a waiting game, where the biggest fish win.
Do you have a second manufacturing partner to mitigate the risk of card inventory issues? Take the assessment to learn more.
By diversifying business continuity and disaster recovery plans through a second manufacturing partner, issuers mitigate the risks of card reissuance and put the cards into consumer’s hands more quickly. Selecting a producer that doesn’t require an upfront investment in physical inventory further reduces costs and risk.
Cardholder and Merchant Education is Still a Priority.
With more merchants becoming EMV-enabled, it is more important than ever to continue educating everyone about EMV. There are already accounts of consumers skipping over EMV-enabled cards because they perceive the hassle to be greater than the security benefit. Additionally, more than 70 percent of consumers had not received any communication about EMV from their credit union or bank at the initial transition deadline, despite the importance of doing so.
Communication will become even more important because of the misperceptions CNP fraud can create among consumers. Issuers can combat the uptick in CNP concerns by reissuing quickly, and providing clear, personalized materials and messaging that explains the source of the fraud, and how both issuers and cardholders can keep their account information secure.
In the US, we have the benefit of global trends to navigate increasing CNP fraud. But paired with unprecedented online and mobile transactions, the US market might blow those trends right out of the water. Issuers can reduce costs and risk and safely navigate EMV and CNP Fraud with a solid business continuity, diversification and communications plan.
To further help you plan for successful card reissuance throughout 2016, click here to take the card issuer risk assessment to receive a complimentary risk evaluation.
