3 ms·

CC fraud in the US is/was waaaaay higher. Earlier EU adoption had to do with lower CC merchant fees..

deleted 10y ago
[deleted]
seliopou 10y ago
This is factually incorrect on two grounds: First, the adoption of Chip & Pin in Europe predates the European Union. Second, credit card fraud in Europe, France in particular, was out of control before its adoption. I believe it was either a French or Swiss researcher that developed the technology in response.
- pcl 10y ago
  My understanding is that French (and presumably other European) banks assigned the liability for fraud to the account holder, whereas in the US, liability for fraudulent credit card charges falls to the banks and the credit card processing networks. This meant that individual account holders were much more tolerant of chip-and-pin technology, and demanded additional security features like portable card readers, which mean that the credit card never leaves the account holder's possession.
  - ams6110 10y ago
    In the US the liability for fraud is on the merchant accepting the card.
    - jessriedel 10y ago
      This is mostly false. In the past, the liability was completely on the bank. In October, it switched to the merchant only if the merchant hadn't upgraded to a chip reader. The switchover process is continuing, and when it is complete the liability will be with the banks, as it was before.
      - sokoloff 10y ago
        It's been a while, but I seem to recall in a past company that for card-not-present transactions, the risk of fraud was on us, not on the bank approving the transaction.
  - jessriedel 10y ago
    Do you have a source for this? Lite googling suggests this isn't true now in the UK (e.g., http://www.theukcardsassociation.org.uk/faqs/ http://www.theukcardsassociation.org.uk/faqs/ ) and I can't find any evidence it was true in the past. Edit: it's also not true in France now: http://www.french-property.com/guides/france/finance-taxation/banking/bank-cards/ http://www.french-property.com/guides/france/finance-taxatio...
- occamrazor 10y ago
  Chip and pin does not predate the EU. Debit cards used to be swipe and pin since the 80's, credit cards were not so widely used and supported both pin and signature.
- occamrazor 10y ago
  Chip and pin does not predate the EU. Debit cards used to be swipe and pin since the 80's, credit cards were not so widely used and supported both pin and signature.
jessriedel 10y ago
I don't doubt that that many complicated economic and political factors influenced things, but you're interpreting the fraud data wrong. The US credit card fraud rate as a fraction of transactions value is currently only double (~2.1 times) the EU rate, and only 1.5 times the UK rate: http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf http://www.paymentscardsandmobile.com/wp-content/uploads/201... I am unable to find good data on fraud rates in Europe going back before chip-and-pin, but the system reduced fraud in the UK by ~60-70%, at least for face-to-face transactions: http://blog.unibulmerchantservices.com/wp-content/uploads/2013/01/Most-of-Europes-Credit-Card-Fraud-Is-Committed-in-the-U.S.-3.png http://blog.unibulmerchantservices.com/wp-content/uploads/20... So the UK almost certainly had significantly higher fraud than the US before rolling out chip-and-pin. If seliopou is right, then this was also true for France. Let me know if you can find better Europe-wide data.
superuser2 10y ago
And lower CC merchant fees respond to the merchants' losses to fraud.
- jessriedel 10y ago
  Could you explain what you mean?
  - colechristensen 10y ago
    In the US there is a ~1.5-5% fee for each credit card transaction. In the EU it's capped at 0.3% Losses due to fraud are much easier to eat in the US because of the 10x larger fee.
  - superuser2 10y ago
    Interchange fees are set based (in large part) on how much fraud the processor expects to deal with. This is why interchange fees are lower for card-present than card-not-present transactions, and higher in business categories that tend to have more fraud. A processor does not charge lower fees for chip cards in a vacuum, they do it because they expect to eat less fraud from chip cards.
    - jessriedel 10y ago
      Oh, I understand what you're claiming now. But I don't think the effect your describing is very important. As colechristensen points out, the fees in the US are 5-20 times larger while their fraud rate is only about twice. So it looks like other factors (e.g. degree of regulation, monopsony effects, etc.) have a much larger influence on interchange fees than fraud rates. Indeed, the amount lost from fraud is only about 0.1% of transactions in the US, and 0.05% in the EU. http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf http://www.paymentscardsandmobile.com/wp-content/uploads/201...

deleted 10y ago

[deleted]

This is factually incorrect on two grounds: First, the adoption of Chip & Pin in Europe predates the European Union. Second, credit card fraud in Europe, France in particular, was out of control before its adoption. I believe it was either a French or Swiss researcher that developed the technology in response.

pcl 10y ago
My understanding is that French (and presumably other European) banks assigned the liability for fraud to the account holder, whereas in the US, liability for fraudulent credit card charges falls to the banks and the credit card processing networks. This meant that individual account holders were much more tolerant of chip-and-pin technology, and demanded additional security features like portable card readers, which mean that the credit card never leaves the account holder's possession.
- ams6110 10y ago
  In the US the liability for fraud is on the merchant accepting the card.
  - jessriedel 10y ago
    This is mostly false. In the past, the liability was completely on the bank. In October, it switched to the merchant only if the merchant hadn't upgraded to a chip reader. The switchover process is continuing, and when it is complete the liability will be with the banks, as it was before.
    - sokoloff 10y ago
      It's been a while, but I seem to recall in a past company that for card-not-present transactions, the risk of fraud was on us, not on the bank approving the transaction.
- jessriedel 10y ago
  Do you have a source for this? Lite googling suggests this isn't true now in the UK (e.g., http://www.theukcardsassociation.org.uk/faqs/ http://www.theukcardsassociation.org.uk/faqs/ ) and I can't find any evidence it was true in the past. Edit: it's also not true in France now: http://www.french-property.com/guides/france/finance-taxation/banking/bank-cards/ http://www.french-property.com/guides/france/finance-taxatio...
occamrazor 10y ago
Chip and pin does not predate the EU. Debit cards used to be swipe and pin since the 80's, credit cards were not so widely used and supported both pin and signature.
occamrazor 10y ago
Chip and pin does not predate the EU. Debit cards used to be swipe and pin since the 80's, credit cards were not so widely used and supported both pin and signature.

jessriedel 10y ago

I don't doubt that that many complicated economic and political factors influenced things, but you're interpreting the fraud data wrong. The US credit card fraud rate as a fraction of transactions value is currently only double (~2.1 times) the EU rate, and only 1.5 times the UK rate: http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf http://www.paymentscardsandmobile.com/wp-content/uploads/201... I am unable to find good data on fraud rates in Europe going back before chip-and-pin, but the system reduced fraud in the UK by ~60-70%, at least for face-to-face transactions: http://blog.unibulmerchantservices.com/wp-content/uploads/2013/01/Most-of-Europes-Credit-Card-Fraud-Is-Committed-in-the-U.S.-3.png http://blog.unibulmerchantservices.com/wp-content/uploads/20... So the UK almost certainly had significantly higher fraud than the US before rolling out chip-and-pin. If seliopou is right, then this was also true for France. Let me know if you can find better Europe-wide data.

superuser2 10y ago

And lower CC merchant fees respond to the merchants' losses to fraud.

jessriedel 10y ago
Could you explain what you mean?
- colechristensen 10y ago
  In the US there is a ~1.5-5% fee for each credit card transaction. In the EU it's capped at 0.3% Losses due to fraud are much easier to eat in the US because of the 10x larger fee.
- superuser2 10y ago
  Interchange fees are set based (in large part) on how much fraud the processor expects to deal with. This is why interchange fees are lower for card-present than card-not-present transactions, and higher in business categories that tend to have more fraud. A processor does not charge lower fees for chip cards in a vacuum, they do it because they expect to eat less fraud from chip cards.
  - jessriedel 10y ago
    Oh, I understand what you're claiming now. But I don't think the effect your describing is very important. As colechristensen points out, the fees in the US are 5-20 times larger while their fraud rate is only about twice. So it looks like other factors (e.g. degree of regulation, monopsony effects, etc.) have a much larger influence on interchange fees than fraud rates. Indeed, the amount lost from fraud is only about 0.1% of transactions in the US, and 0.05% in the EU. http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf http://www.paymentscardsandmobile.com/wp-content/uploads/201...