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!
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.