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Why does the U.S. lead the world in credit card fraud?

Ray Moorman

According to a recent Nilson Report study, 47 percent of global credit and debit card fraud occurs in the U.S., even though the nation generates just 27 percent of the world's transactions. Fraud damage costs were more than $3.5 billion last year in the U.S., a release added.(1)

So, if the U.S. produces less than one-third of the total volume of global transactions, how is it possible that nearly half of the world's credit card fraud happens in the United States?

U.S. is behind on EMV technology

The Nilson Report's Publisher David Robertson said the average American consumer has four credit cards in their wallet, making it easier for cybercriminals to attack U.S. businesses simply because we're using cards a lot.

One of the primary drivers behind the Nilson Report figures is the fact that most merchants in the U.S. are lagging when it comes to updated payment processing technology. In fact, a majority of other countries are fully up to speed - and have been for quite some time - on EMV technology. 

EMV, which uses an embedded microprocessor chip in the card to help detect fraud at the point of sale, is a widely accepted means of transaction across most continents.

A European Central Bank study highlights EMV's effectiveness, as the total value of fraud and the share of transactions decreased 7.6 percent between 2007 and 2011. ATM and POS fraud specifically declined during the same time period, with the latter decreasing 24 percent.(2)

The tangible benefits of EMV technology are clear, as seen in other countries that have adopted the more modern form of payment processing.  While most other countries are using EMV to process customer transactions, the U.S. adoption rates are well behind the rest of the world. According to EMVCo, adoption rates were less than 1 percent in the fourth quarter last year. By contrast, adoption rates for every other continent was more than 70 percent.(3)

The current technology most domestic merchants use to process customer payments, swiping the magnetic stripe, is close to 50 years old and lacks cutting-edge security measures. While EMV adds another layer of protection at the physical point of sale, the magnetic stripe leaves information susceptible to theft, therefore leading to higher fraud and counterfeit rates in the U.S. Although customer information is more at risk, merchants may not want to pay the upfront investment required to upgrade their payment processing infrastructure. ​

However, as of Oct. 1, 2015, many local businesses may need update their payment terminals. The EMV liability shift deadline is fast approaching, and merchants that aren't EMV-compliant can be liable for financial damages in the case of fraud. Although domestic small and local businesses are reluctant to invest in new POS infrastructure, the payoff for protecting one's own company - and its customers - from a potential breach can far outweigh the initial upfront investment.

  1. BusinessWire, http://www.businesswire.com/news/home/20111121005121/en/U.S.-Leads-World-Credit-Card-Fraud-states#.VSwfGvnF-RM (Nov. 22, 2011)
  2. European Central Bank, https://www.ecb.europa.eu/press/pr/date/2013/html/pr130716.en.html (July 16, 2013)
  3. EMVCo, https://www.emvco.com/about_emvco.aspx?id=202 (2015)

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