iovation, the leading provider of device intelligence for authentication and fraud prevention, is predicting a significant increase in card-not-present fraud—fraudulent transactions where a credit card is not physically presented to a merchant—from Black Friday to Cyber Monday when compared to past years. iovation attributes the anticipated rise in fraud to the recent shift from consumers using traditional credit and debit cards with magnetic strips to EMV (Europay, MasterCard, and Visa) chipped cards.
“Leading into last year’s holiday shopping season, physical retailers began adopting EMV cards to protect their card-present transactions. A by-product of this switch is that fraudsters are adapting their techniques from card-present fraud to online schemes since chip technology makes the cards nearly impossible to counterfeit,” said iovation CTO Scott Waddell. “Now, more than a year later, the bad guys have had plenty of time to adapt their tactics and are in full swing with their online assault.”
This upward trajectory aligns with a report released earlier this year by iovation and research and advisory firm Aite Group—which found CNP fraud will cost retailers and financial institutions $7.2 billion in the United States by the end of 2020. Conversely, the report found that as more merchants become EMV-capable, counterfeit fraud will fall from a high of $4.5 billion to less than $1 billion in 2020.
New research from iovation finds that since October 2015 online credit card fraud increased 35 percent.1 October 2015 was when the U.S. liability shift began where U.S. merchants who didn’t accommodate chip cards faced a larger financial burden for fraudulent transactions.
“Since the U.S. EMV shift, we have expected to see a rise in CNP fraud, as this pattern has occurred in other countries adopting the chip cards,” said Julie Conroy, research director at Aite Group. “Moving into the 2016 shopping season where retail transactions traditionally increase and so does fraud, online retailers are on notice to mitigate the increased risk.”
The Mobile Shopping Era Has Arrived
iovation also predicts that 52 percent of retail online transactions from Black Friday to Cyber Monday will be conducted using mobile phones and tablets this year. This continues an ongoing mobile retail transaction increase over the holidays and year-to-year. Specifically, iovation data shows:
The annual growth in mobile retail transactions
- 44 percent of all online transactions were made from a mobile device in 2015
- 32 percent of all online transactions were made from a mobile device in 2014
- 20 percent of all online transactions were made from a mobile device in 2013
Mobile retail transaction increases over Black Friday to Cyber Monday
- 47 percent of all online transactions were made from a mobile device during the period in 2015
- 37 percent of all online transactions were made from a mobile device during the period in 2014
- 31 percent of all online transactions were made from a mobile device during the period in 2013
iovation came to these conclusions by analyzing the tens of millions of transactions that its authentication and fraud prevention solutions process every year from Black Friday to Cyber Monday, and the billions of transactions it analyzes for fraud indicators every year. The company authenticates the trustworthiness of transactions and devices for some of the world's biggest global brands through a combination of advanced device identification, shared device reputation including 30 million client-contributed fraud reports, and real-time risk evaluation. This creates unique insight into retail and financial industry transactions—two key sectors for holiday shopping.
1 iovation analyzed detailed transactions in its global device intelligence platform from online retailers during the periods of Nov. 1, 2014 to Oct. 31, 2015 and Nov. 1, 2015 to Oct. 31, 2016