The shift to EMV hasn’t run precisely smooth: the card networks are behind schedule certifying the new machines, and retailers are complaining about more chargebacks and unforeseen delays. Checkout takes longer, and there’s been a lack of government support in education

In the end, though, most retailers and industry experts are willing to agree that EMV is a necessary step in protecting card data and preventing card present fraud. The true challenge is that faced by card not present (CNP) retailers.


The Global Fraud Attack Index™ reported that online fraud attacks grew 163 percent between Q1 2015 and Q3 2015, and that trend shows no sign of stopping. Fraudsters don’t give up because of EMV - they just redirect their efforts to CNP channels. That could be disastrous for retailers who aren’t keeping up technologically because, as Forrester has commented, “legacy fraud management mechanisms fail in today’s economy.”

The Rise in Card Not Present Fraud

EMV helps when the card is physically present, but not otherwise. And since EMV makes fraud in card present transactions harder, fraudsters move to CNP channels instead. They move to online, mobile and phone channels. That’s only logical.

It’s also predictable: many countries experienced a significant spike in CNP fraud after EMV adoption. In France, famously, CNP losses increased more than 360 percent in the five years after EMV, a trend in which EMV played its part. Forrester have predicted that U.S. CNP fraud will increase by 55 percent in the years following EMV adoption.

Moreover, liability lies on the retailer for CNP transactions. Fraud losses are their losses. Online retailers, of all sizes and across all verticals, stand to lose a lot when fraud increases, if they don’t have top-notch fraud prevention.

Cutting Edge Fraud Prevention

The good news is that advances in technology mean that fraud prevention is capable of feats that were impossible even a few years ago. The best fraud prevention is great at catching fraud, and also contributes to a great customer experience (and thus more sales).

Fraudsters are fast, creative, and often work in groups. They benefit from a sophisticated underground ecosystem and technological advances. By Q3 2015, suspected botnet attacks had risen to an astonishing 82 percent of all fraud attempts in the U.S.

Not only is online fraud growing, it’s becoming more complex, as fraudsters work across channels, manipulate alternative payment methods and use technology to create new techniques and refine old ones. At the same time, the expectations of good customers are higher than ever so that checkout has to be fast, easy and friction-free. To keep up, fraud prevention needs to be agile, adaptive and intelligent.

Fortunately, it can be. Machine learning has made it possible for systems to leverage the tremendous power of “big data” so that the machine learns from every transaction, becoming increasingly accurate over time. Allied to human expertise, researching and understanding patterns and the reasons behind them, this is a vital step forward in the fight against fraud.

Adapting to Automation

Full automation has recently become possible in fraud prevention. Until lately, retailers had to rely on manual reviews - at 5 minutes per review. That’s not even remotely compatible with the real-time service and purchase experience expected by today’s customers.

New technology means that retailers can fully automate their fraud prevention, so the rise in online fraud post-EMV won’t cause scaling issues. In fact, the flood of data only makes it more accurate.

A customer whose order moves through time-consuming manual review will often become confused (did that order go through or not?), annoyed and frustrated. They may cancel the order, or they may simply promise themselves never to return to the site in future. That’s even more probable when you factor in the associated fulfillment delay.

The more transactions that need reviewing, post-EMV, the more these negative experiences will occur. Fortunately, automated fraud prevention means real-time fraud prevention - with no delays in confirmation or fulfillment. That means more sales and happier customers.

Accuracy, not an Aversion to Risk

Today’s cutting edge technology is also accurate, not risk-averse. Advances such as behavioral analytics and cyber intelligence, allied to machine learning and human research, have made it possible to judge each customer on their own merits, and not according to clumsy, inflexible rules.

This is important because many retailers are tempted to respond to the threat of increased fraud attacks by becoming more conservative about which transactions they approve. That approach will help limit the amount lost to fraud - but it’ll also stop good customers from making their legitimate purchases. And that’s terrible for business.

It’s time for retailers to move to fully automated fraud prevention. EMV doesn’t signal good news for CNP fraud, but that shouldn’t mean bad news for online retailers. Merchants can stay ahead of the fraudsters, and transform their fraud prevention into sales enablement - and the time for that change is now.

Zielke is CMO of Forter, a Sequoia-backed e-commerce fraud solution platform.