A senior staffer at the Federal Reserve Bank of Atlanta has queried the business case for a mass market migration to EMV-based Chip and PIN technology in the US.
With a little over two years until the first liability shifts for the US are scheduled to take place in April 2015, issuers are being urged to set out their migration roadmaps as an urgent business priority.
Much of the thrust behind the shift is based on the fallibility of magnetic stripe cards and the US' exposure to rising fraud as other countries switch over to chip cards.
But as Douglas King, a payments risk expert at the Atlanta Fed points out in a recent blog post: "Fraud is but a small, albeit growing, expense on an issuers' income statement."
He points to the example of Discover - which is five years into its planning for EMV migration - which reported $93 million in fraud losses for 2012, or roughly $8 million more than it spent on postage. By comparison, net charge-offs from credit card debt cost it over $1.2 billion in 2012 and as much as $3.7 billion in 2010.
Further, as King points out: "It's no secret by now that while EMV has been excellent at reducing face-to-face fraud, card-not-present (CNP) fraud continues to rise because EMV does not effectively prevent it in today's online environment."
Across the border in Canada losses from CNP fraud since the roll-out of Chip and PIN in 2008 had more than doubled by 2011, rising from C$128 million to C$259.5 million.
"Ultimately, EMV as it exists today only solves part of the fraud equation," says King. "Until a cost-effective and consumer-friendly CNP fraud reduction solution gains traction, I believe a business case for EMV built around fraud losses will remain difficult to build."