December 1, 2015
The LTP team recently had the pleasure interviewing Don Bush, VP of Marketing at Kount, a fraud prevention company, on matters of EMV as it has been a month since the liability shift deadline has passed. Don shared his thoughts on the threats and opportunities caused by the new requirement and his expectations on data breaches and CNP fraud spikes. Here is the transcript of the interview with Don:
LTP: For the part of our audience that may not be familiar with Kount, please tell us about the company and services you provide.
Don Bush: Kount is a leading innovator of solutions for fraud and risk management. Kount’s sophisticated artificial intelligence and patented processes keep fraud to a minimum without stopping legitimate orders from being approved and processed. For each transaction, Kount’s decision engine analyzes hundreds of relevant variables and activity across the globe in real-time to validate genuine transactions from fraudulent ones. While reducing and anticipating the risk of fraudulent activity, Kount’s intuitive business intelligence tools help merchants increase revenue opportunities in the future, thus boosting sales while reducing fraud and dramatically decreasing, or eliminating, the need for manual review.
LTP: As the EMV implementation deadline is now one month over and the liability shift has happened, what can retailers and consumers expect with EMV?
DB: Retailers should expect to see point-of-sale and ATM fraud decrease dramatically over the next year or two. The shift to EMV is a good first step in combatting fraud—specifically for card-present transactions. While credit cards using a magnetic strip provide the same data for each transaction, EMV chips create a unique code for every transaction made. This will not only increase security and reduce fraud for in-person transactions but also enable the use of future value-added applications such as remote chip authentication, loyalty programs and information-based programs. EMV will make card duplication much harder, cutting down on counterfeiting fraud or fraud at the point-of-sale.
Consumers will see more of a push toward new mobile payment options (like Apple Pay or Samsung Pay) as these offerings gain ground in the mobile arena. They should be aware of the online and mobile fraud risks that come with EMV implementation, and try to only conduct business with retailers who make their security a priority.
LTP: It is widely discussed that EMV does not prevent fraud, that it just shifts it towards online channels/e-commerce. What are your thoughts on that? What should retailers expect?
DB: It’s true that the EMV shift will lead to an increase in online and card-not-present (CNP) fraud. While in-person fraud will see a decrease from EMV, fraudsters will shift their tactics to the online and mobile channels, which EMV does not protect against. We know this because every market that EMV has been implemented in, fraud has gone up dramatically in online and mobile channels. The UK experienced a 350% increase in CNP fraud losses over the following years from the adoption of EMV.
LTP: What are your predictions on data breaches for retailers?
DB: Unfortunately, large-scale data breaches (like the one Target experienced in 2013) have become commonplace, with a number of major names (such as T-Mobile) becoming victims this year. More compromised and stolen data than ever before is available; all of the data a person needs to commit fraud is easily accessible and much of it is available online. There are only two types of organizations—those who have been breached and those who can be breached. Recent reports showed that in 2014, over 1,500 breaches compromised over a billion records. Fraudsters are nimble and adapt quickly, so retailers will likely be susceptible to a data breach if they aren’t adopting solutions, such as tokenization, that evolve faster than fraudsters.
LTP: EMV-terminals are getting actively deployed and customers are receiving their cards. Even though EMV wasn't a standard in the US, customers are actively adopting it (as they are forced to). Do you think it is a sign for merchants and other players in the payments market like Apple Pay, Samsung Pay that consumers are open and eager to adopt different payment vehicles?
DB: Absolutely. Since consumers are now required to use EMV terminals, it’s a great time for mobile wallets to try and spur adoption amongst consumers. Transitory periods are always a good time for new methods to be introduced. I think we will see incentives, promotions and special offers for those that pay with new methods to try and change their behavior towards paying with their devices instead of the typical payment methods (credit cards, cash, etc.). We’re also seeing a move by credit companies to gain new customers and ramp up their efforts to be the primary card in a consumer’s wallet.
LTP: How do you see the future of mobile payments at the POS and online payments? What are your expectations?
DB: Mobile wallets are still in the infancy stage, but I expect more and more consumers will adopt them as the offerings expand and become more commonplace among retailers. We anticipate mobile will begin to overtake POS and online transactions. Online payments will continue to increase, and will eventually become the primary method of shopping. Our data shows that the average online and in-store transaction amounts were greater than those on mobile devices overall until the first six months of 2015, in which purchases on the iPhone ($129.94) and iPad ($164.19) began to exceed non-mobile transactions ($106.94).
LTP: The payments market is getting very fragmented with new players entering the space (Chase Pay coming next year, for example). What are your thoughts on that trend? Where is it going with the increasing number of ways to pay in the supermarket?
DB: Consumers will continue to test out various options in mobile payments, but I expect that there will eventually be an all-encompassing option that gets the majority of the market share. Once payment providers figure out the best way to make mobile payments and wallets seamless for users, consumers and businesses will flock to the most accessible, widely used and widely accepted method.