Let’s say a customer walks into your store, taps their phone after making purchases and walks away with your merchandise, but the payment never actually lands in your account.
Welcome to the reality of EMV offline fraud—a stealthy attack taking advantage of gaps in contactless payment systems.
Remote payment fraud is surging, fueled by the boom in e-commerce and contactless transactions.
Card Not Present (CNP) fraud accounted for 73% of card fraud losses in 2023, accounting for over $9.49 billion in loss globally
Today, fraud isn’t just online; it’s now walking out of stores undetected as fraudsters now exploit the very tools designed to make in-person payments faster and easier.
You could be footing the bill for their shopping spree if you’re not vigilant.
In this article, we’ll break down this scheme and explore actionable steps merchants can take to stop fraudsters in their tracks and secure their business before it’s too late.
How EMV Offline Fraud Works: A Step-by-Step Breakdown
Here is a step-by-step breakdown of how fraudsters exploit the EMV offline payment system:
- First, the fraudster initiates a fake transaction using a malicious mobile app. The app is specifically designed to manipulate EMV card readers, exploiting the system’s trust in offline transactions to create a seamless yet fraudulent interaction.
- Next, the app sends a deceptive signal, triggering the terminal to switch into offline transaction mode. This mode bypasses real-time network verification, a feature originally meant for areas with limited connectivity but now weaponized against merchants.
- After that, the app generates a fake approval message (POS entry mode 07), tricking the terminal into accepting the transaction. The terminal believes the payment is valid, even though no actual funds are authorized.
- Finally, the fraudster walks away unchecked. With goods or gift cards in hand, the fraudster exits, leaving the merchant unpaid. These schemes often go unnoticed until reconciliation, allowing fraudsters to repeatedly exploit the vulnerability and drain revenue.
Why This Matters to Merchants
For merchants, EMV offline fraud isn’t just a technical hiccup—it’s a direct hit to revenue and trust.
Fraudulent offline transactions often go unnoticed until reconciliation, leaving merchants unable to recover lost funds.
With global losses from payment card fraud projected to reach $38.5 billion by 2027, businesses can’t afford to ignore this threat.
Offline fraud is particularly dangerous because it targets high-value goods, gift cards, or quick-sell items, compounding financial losses.
Beyond dollars, these attacks erode customer trust and strain operations as merchants invest time and resources into damage control.
The rising sophistication of fraud schemes underscores the need for proactive defenses, ensuring every transaction is as secure as it seems.
The Defensive Playbook: Steps to Protect Your Business
Here are a few steps that help you secure your business:
Keep Your POS Software Updated
Outdated systems are an open invitation for fraud. Regular updates ensure your POS software is equipped with the latest security patches and fraud detection tools.
Studies reveal that POS system breaches exploit known vulnerabilities, making timely updates a non-negotiable defense.
Disable Offline Transaction Modes
If your business doesn’t rely on offline or deferred authorizations, consider disabling them.
Fraudsters exploit these modes to bypass real-time verification. Eliminating offline options reduces exposure, ensuring every transaction is validated before the customer leaves with your goods.
Use Velocity Controls
Set transaction limits for offline payments to prevent repeated attacks. Velocity controls, which restrict multiple transactions within short periods, have proven effective in curbing fraud attempts. They act as a speed bump for fraudsters trying to exploit unchecked systems.
Implement Advanced Monitoring Tools
Modern fraud-monitoring tools flag suspicious patterns, like excessive offline transactions or irregular approvals. Merchants using real-time monitoring reduce fraud losses by up to 75%. These tools provide insights to catch fraud early, protecting your business from escalating attacks.
The Role of Enhanced Authentication
Strong authentication is your frontline defense against fraud.
Tools like 3D Secure (3DS) and biometric verification significantly reduce unauthorized transactions by confirming cardholder identities in real-time.
Studies show that implementing 3DS can cut fraud rates by up to 61% while maintaining a seamless checkout experience (Visa).
Enhanced authentication also strengthens trust, showing customers that you prioritize their security.
For merchants handling card-not-present transactions, these measures are especially crucial, as CNP fraud is projected to account for 74% of all card fraud by 2024.
By integrating multi-factor authentication and biometric tools, you close critical gaps, making it nearly impossible for fraudsters to exploit weak links in your payment process. Secure payments build lasting confidence.
Transparency: Your Best Defense
Fraud thrives in confusion, making transparency your most effective weapon.
For merchants facing the growing threat of EMV offline fraud, adopting transparent and proactive security measures is essential to build resilience.
Regularly reviewing offline transactions, implementing advanced monitoring tools, and enforcing strict authentication protocols can help detect and neutralize threats early.
According to the Federal Reserve, large merchants and banks have developed robust tools to detect and prevent fraud, making criminals turn to small and medium-sized enterprises as their prime target.
When merchants shine a light on their processes, they transform into resilient defenders against evolving fraud schemes, safeguarding their revenue and reputation.
Fraud Stops Here: Verifee is Here to Protect Your Business
Success shouldn’t come at the expense of falling victim to fraud.
In line with VeriFee’s commitment to secure payment practices and as a “fraud-fighting ally,” we stand at the forefront of protecting businesses from EMV offline fraud.
By uncovering vulnerabilities in offline transaction systems, we empower merchants to adopt proactive defenses against evolving schemes.
Our blend of advanced fraud detection tools and in-depth industry knowledge ensures you stay one step ahead, shielded from the tactics that exploit EMV technology.
This dedication to transparency and security reinforces Verifee’s role as a trusted partner for businesses navigating the intricate and sometimes risky world of payment systems. Don’t wait for fraud to strike, reach out to us now.
