With Its EMV Conversion Nearly Complete, Canada’s POS Debit Fraud Falls to New Low

Canada’s Interac Association PIN-based debit card network once again is reporting lower fraud losses as the country’s conversion to the EMV chip card standard nears completion.

The Toronto-based network said Thursday that fraud losses from skimming, in which card data are stolen from the magnetic stripe, to financial institutions that issue Interac debit cards dropped for the sixth year in a row to a record low of $11.8 million, down 27% from $16.2 million in 2014. (All dollar figures in this story are Canadian.)

Canada began its so-called chip-and-PIN conversion in 2008. Interac’s fraud losses from skimming peaked at $142.3 million in 2009, but now are down by 92%. Cardholders reimbursed for fraud losses under Interac’s zero-liability policy numbered 25,000 in 2015 versus 239,000 in 2009.

“EMV is the big story behind this,” Mark Sullivan, head of fraud market management at Interac, a unit of Acxsys Corp., tells Digital Transactions News. “We expect to see a continuing drop in the criminals’ ability to obtain funds from Canadian consumers.”

What’s more, only $2 million, or 17% of 2015’s fraud, occurred in Canada, down 40% from $3.4 million the year before. Virtually all of that occurred at the few merchant locations that still haven’t upgraded their point-of-sale terminals to accept chip cards, says Sullivan. According to Interac, 100% of Canadian debit cards and automated banking machines, or ABMs (ATMs in the U.S.), have been converted to the chip card standard, in addition to 99% of POS terminals.

The other 83%, or $9.8 million, of 2015’s fraud happened outside of Canada, typically in situations where the cardholder used the card’s back-up magnetic stripe because the merchant or ATM didn’t read chip cards. Such transactions occurred on networks with which Interac has agreements to enable Canadians to use their debit cards. For example, holders of Interac cards from many Canadian banks can use their cards at PIN-debit-accepting U.S. merchants through an agreement with the NYCE debit network, a unit of Fidelity National Information Services Inc. (FIS).

In all, Interac processed $347 billion last year through 5.91 billion transactions for a fraud rate of 0.003%.

For Canadian consumers, ABMs began accepting only chip-based Interac transactions as of Jan. 1, 2013. POS mag-stripe Interac transactions using debit cards issued by Canadian banks were banned beginning this year.

Interac has a service for Internet purchases called Interac Online. Fraud figures for that service were not immediately available. Online fraud has boomed in other countries as EMV took hold, but in Canada most online fraud is on credit cards or other networks’ debit cards, according to Interac.

In addition to the EMV technology itself, Interac’s aggressive EMV education programs for consumers, merchants, financial institutions, and law enforcement, and the network’s efforts to convert the most fraud-prone merchants to chip acceptance early, also played roles in 2015’s fraud reduction, says Sullivan.