Do Chip Cards Help to Reduce Fraud?
As of July 2016, 88% of Mastercards in the United States have chips, which is a 105% increase since the October 1, 2015 liability shift. There are also two million chip-active merchants, which represents one-third of all U.S. merchants and reflects a 468% chip terminal increase.
This market saturation is good news, as the chip cards are helping to minimize fraud. The chip creates a unique code for all transactions, which makes it difficult to counterfeit cards. Mastercard’s fraud data shows that counterfeit fraud costs have decreased 54% from April 2015 to April 2016 among merchants who accept chip cards. To prove this drop is attributable to the new cards, Mastercard found that counterfeit fraud costs increased 77% during the same time period for U.S. merchants who have not yet migrated to the new terminals.
“We need chip cards in wallets and chip terminals at checkout to continue to drive card fraud out of the U.S. This country is one of the most complex markets in the world so we know things won’t change overnight,” said Craig Vosburg, president of North America for Mastercard. “However, we’re encouraged by the significant progress over the last 11 months. With every additional chip transaction we move closer and closer to our collective goal – moving fraud out of the system.”
Mastercard is working with merchants to ease chip adoption. Since many consumers complain of slow checkout times, Mastercard is working on technology to speed up transactions. In May, the company launched its M/Chip Fast technology, which tries to make chip card transactions just as fast as the traditional magnetic stripe.
The research also found consumers are starting to use their chip cards more often. 9 in 10 cardholders commonly use their chip cards, which is a 38% increase from last year.
“As more U.S. cardholders use their Mastercard chip cards, they are learning the benefits of increased safety and security. It’s no small undertaking to change the way people pay for things. The only reason to start this big a task is to make people’s lives better. Chips have the potential to do just that,” said Chiro Aikat, senior vice president of Mastercard’s product delivery.