ATM skimming fraud is becoming a growing concern for banks and credit unions as criminals intensify their efforts to steal payment card information. With magnetic stripe cards still widely used in the U.S., ATMs provide fraudsters with an opportunity to capture card data and use it to create counterfeit cards.
The sharp increase in successful skimming incidents comes as the U.S. payment industry transitions toward EMV chip technology. Experience in other markets suggests fraudsters may increase attacks on magnetic stripe cards while vulnerabilities remain, adding urgency to financial institutions’ efforts to move customers to more secure chip cards.
It seems like there’s a cyber-hack story in the headlines every other day. But while merchants—and even the Internal Revenue Service—crack down on digital breaches, thieves are targeting another source of power: automatic teller machines.
That is spurring a broad movement to more secure methods of payment.Crooks are stealing credit and debit card data from U.S. ATMs at the highest rate in 20 years, according to recent data from credit scoring firm FICO, and they don’t seem to be slowing down.
Year over year, card skimming, in which thieves swipe user data, at bank-owned ATMs is up a dramatic 174 percent. At non-bank ATMs, compromises are up 317 percent. These numbers represent successful incidents.
EMV Migration Increases Pressure on Fraudsters
As predicted in previous Mercator Advisory Group research, fraudsters are ramping up their nefarious deeds in anticipation of an increase of the availability, and use, of EMV cards in the U.S. This phenomenon, with crooks increasing their hacking and skimming activities on mag stripe-equipped cards before they are replaced with more secure EMV chip cards, has occurred in virtually every global market transitioning to chip cards. This is why many of today’s banks and credit unions are accelerating their efforts to get EMV cards in the hands of their customers and members as soon as reasonably possible.
The increase in ATM skimming fraud illustrates one of the challenges financial institutions face during the transition from magnetic stripe cards to EMV technology. As long as less-secure cards remain in circulation, criminals have an incentive to exploit existing vulnerabilities before chip cards become more widely adopted.
For banks and credit unions, accelerating EMV card issuance can help reduce exposure to counterfeit card fraud while providing customers with stronger payment security. The experience of other countries suggests that heightened fraud activity can accompany the transition period, making the move to EMV an increasingly important priority for U.S. financial institutions.
Overview by Ed O’Brien, Director, Banking Channels Advisory Service at Mercator Advisory Group
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