Visa’s announcement regarding accelerating chip acceptance in the United States started a lot of discussion across the finance industry. Many markets outside the US have been using chip cards heavily for some time now (especially European markets), and have quoted significant declines in fraud tied to counterfeit, lost/stolen, and non-delivered cards. The US following so much later has been viewed as odd by skeptics, long overdue by supporters, and too expensive/a bad idea by critics. No matter the view, my single greatest concern has been the likelihood that stricter POS fraud prevention will drive more fraud online.

Fraud (and criminal behavior in general, for that matter) can be compared to water flowing through a collection of pipes. Close off one pipe and either the pressure will build up to the point where it blows, or the water will find another path. In any case, the water doesn’t go away. Following the analogy, if we tighten or close the physical POS pipe, more fraud will head online. We may wish the fraudsters would just shrug, sigh, pack their bags, and head out of town, but history shows us that is very unlikely.

Workloads are building up within financial institutions across the United States as they plan for the coming “tide of chips” next year. Those institutions would do well to ensure that they take a fresh look at their card not present technologies and gear them up in tandem with chip card support. At the risk of sounding like a doomsayer, I would wager that unpleasant surprises are in store for those  institutions who don’t take special precaution to plan ahead, as the flow of water heads from one pipe to the others.