Mobile & Online Payments Security

When America catches up to Europe with EMV, ecommerce will take a hit

When America catches up to Europe with EMV, ecommerce will change. Image Freepik
Written by Bernard Lunn

Bernard Lunn explains why the introduction of EMV chip and pin cards in the US may impact ecommerce.

In October, America will finally make the transition to chip and pin cards. Chip and pin cards reduce fraud for card-present transactions in physical stores. The chip adds another layer of protection for each transaction through a dynamic, unique authentication every time a merchant accepts payment.

This is great for card-present transactions, but what’s going to happen with online payments? If you live in Europe and buy stuff online, you already know the answer, because you will have already faced the additional data you have to fill in. If the transaction is essential, you persevere. If the transaction is nonessential, you abandon.

Following the October 2015 EMV transition in America, expect an increase in ecommerce abandoned shopping carts. Takeaway: short Amazon or other ecommerce vendors. I assume some hedge funds are working on that!

Criminal motivation

The reason is that countries that switched to EMV payment cards experienced a sharp increase in ecommerce fraud (21% in Europe in 2012 after chip and pin was introduced). It’s not that ecommerce suddenly became more insecure. The reason for the fraud increase is simply that the fraudsters found it harder to use counterfeit cards in physical stores after chip and pin was introduced. So, fraudsters were motivated to target ecommerce instead.

Any ventures that can reduce ecommerce fraud without increasing friction will clean up. In the meantime, American consumers will face some annoying interruptions to their online shopping experiences. It could be additional identity verification input or two-factor authentication via an SMS message.

This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read the original article by Bernard Lunn of Daily Fintech.

About the author

Bernard Lunn

Bernard Lunn is a serial entrepreneur who used to work for fintech companies such as Misys and Temenos. He has done turnarounds and startups in America, Asia and Europe. He lives in Switzerland and works as an adviser connecting banks, funds and strategics to fintech innovation globally. As part of the research for this, he is Founding Editor of Daily Fintech and provides mentoring to startups.


  • Hi Bernard,

    Not disputing your fraud figures, but I’m not sure how Chip and PIN cards make online checkout any harder. At worst the only additional information you might need would be the Card Security Code (CSV) on the rear of the card. I don’t think this is too onerous or require much more in the way of perseverance. If you’re talking about 3D Secure, the additional layer of security we have in the UK at least, technically that’s nothing to do with Chip and PIN, more a way of banks passing liability for online fraud onto their customers. Although I will definitely agree that that is tedious and does require perseverance.

    Also worth noting, Google, Amazon, and the other big vendors have negotiated with Visa and Mastercard that they don’t need to provide things like 3D Secure, so that problem is partially solved already.

    There are always unexpected consequences whenever anything changes, but I’m not sure they’ll necessarily be quite the ones you’ve detailed.

    • Thanks James, yes 3D Secure is the pain point. Merchants will do this (thru gritted teeth) because post Oct in America they assume liability for fraud. That is the change driver

  • The question of online fraud is not if but when. The need to reevaluate, replan and retool one’s risk and fraud management strategy is here and now, however many are struggling to just keep up with mandated changes forced upon them, be it EMV, PCI or whatever the powers-at-be come up with next.

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