The EMV deadline has come and gone, and customers and retailers alike are realizing that they need to understand and adapt to the new payment reality both online and offline.
EMV cards haven’t gone unnoticed. There is a learning curve for everyone involved, as customers and retail employees get used to dealing with ‘dipping’ instead of swiping cards, and resign themselves to the disappearance of ‘swipe ahead’. And, as Gartner’s vice president and distinguished analyst Avivah Litan points out,
Overall, however, U.S. consumers look set in time to follow in the paths of customers in the other countries which have adopted EMV, where no one even thinks twice anymore about the chip cards and the way they are used. (Though concerns have been raised about the current chip-and-signature option as opposed to the more common, and more secure, chip and-pin.)
This is in stark contrast to the kinds of disruption that customers may experience online. One of the consequences of EMV adoption is a rise in online fraud, as criminals who used to rely on physical cards for theft are blocked by the new technology and move to the softer target of CNP transactions, which are not protected by EMV. In itself, that presents a challenge for online retailers, who are liable for any losses that accrue through successful fraud.
Even worse, as far as consumers are concerned, is what it might mean for their purchase experience. E-commerce merchants who are afraid of fraud often react by instituting stringent anti-fraud policies. They are so focused on avoiding theft that they don’t think about the losses that can result from rejected customers, lost sales and poor customer experience.
Most fraud prevention systems are rule-based, and rely on manual review. As Forrester has reported, “legacy fraud management mechanisms fail in today’s economy.” Rules can’t be adapted fast enough to combat agile fraudsters, but they’re too rigid to allow good customers in slightly unusual situations to complete their purchase. A quarter of declines are false positives - genuine consumers rejected through over-caution. That’s far, far too many lost sales - it’s bad for retailers, and bad for customers.
Moreover, almost all e-commerce merchants rely on manual review, which delays order confirmation and fulfillment, causing some frustrated customers to call up to complain, or simply cancel their orders.
All of this was a problem before EMV, but the looming threat of increased online fraud will probably make it more acute. Fraud prevention impacts checkout efficiency and customer experience, and retailers need to start realizing that, and evaluating their fraud prevention based on how it contributes to the smooth, pleasurable experience they want to provide.
Fraud prevention should be customer-centric, just like the rest of the business. Customers should be “innocent until proven guilty,” and anti-fraud should be fully automated and work in real-time. Anything less is selling the customer short.
Liron Damri is Co-Founder and COO of Forter.
