According to a biannual analysis released by Experian, e-commerce fraud is on the rise. The company attributed the 30 percent increase in attacks to the United States' transition to more secure EMV chip cards late 2015. Even though at first glance that may seem counterintuitive, their hypothesis makes perfect sense. Here's why.
EMV Chip Cards' Strengths — and Weaknesses
EMV chip cards render in-person fraud nearly impossible to commit. When an EMV card is dipped, data is sent between the card chip and the issuing financial institution to verify the card's legitimacy and create a unique transaction code. This is much more secure than magnetic stripe transactions. Data on magnetic stripes is not unique to each transaction; fraudsters can lift the data once and reuse it for illicit purchases again and again until the card is cancelled.
However, the added level of security EMV chip cards bring to in-person transactions does not yet extend to e-commerce. More and more fraudsters are moving to the online arena to make up for lost "revenue" they were used to getting from the in-person sector. This pattern isn't a new one. The majority of countries that have switched to EMV chip cards have seen this initial spike in e-commerce attacks post adoption of EMV technology.
But EMV cards are not going anywhere; nor should they. The answer to lowering credit and debit card fraud isn't making in-person transactions less secure. It's knowing the risks of e-commerce transactions and taking the necessary steps to ensure your own personal payment information isn't compromised.
Let's take a look at the states Experian highlighted as having both the most and least prevalent cases of e-commerce fraud last year, along with actionable steps consumers can take to avoid becoming a victim.
For the report, fraud attack rates were calculated using bad transactions in relation to the total number of transactions. You can view the full heat map on their website.
Top 3 States with Most E-Commerce Fraud in 2016
- Delaware — attack rate 69
- Oregon — attack rate 65.7
- Florida — attack rate 41.1
Top 3 States with Least E-Commerce Fraud in 2016
- South Dakota — attack rate 8.7
- Iowa — attack rate 11
- West Virginia, Wyoming (tied) — attack rate 11.1
Prevent Fraud — Be Vigilant, Be Aware
Consumers should always take precautions when making purchases online. Here are a few checklist items cardholders should go through before trusting a website with payment information:
- Only make purchases on sites preceded by "https." The "s" indicates the site uses encryption to make the transaction secure.
- Avoid making purchases on public Wi-Fi networks. Because these hotspots are public, they're often a breeding ground for thieves.
- Set up text alerts to be notified of every online transaction.
- Check statements each month to confirm no fraudulent purchases have snuck in.
And, for e-commerce merchants looking to stem fraud from their end, we're working on a little something here at Rippleshot that we think you're going to love. Sign up here to make sure you're the first to hear about it.