1. How Security Changed When Fraud Dropped
The amount lost to counterfeit card fraud was 3.2 billion yen in 2017 and 1.6 billion yen in 2018. Although it rose slightly in 2019, the Japan Credit Association believes these measures have worked [1]. This halving was not due to IC chips alone. In March 2015, the Credit Transaction Security Countermeasures Council created an action plan. It set a goal to support IC transactions in face-to-face dealings by the end of March 2020. The plan had three main pillars: protecting card information, preventing counterfeit cards in person, and stopping identity theft in non-face-to-face transactions like online shopping [1]. Card protection has gone through three main stages: an era when magnetic stripe data was copied, efforts to spot fakes using visual marks, and IC chips that cannot be used even if copied.
2. Why Magnetic Stripes Were Easy to Copy
It is said that IBM engineer Forrest Parry attached the magnetic stripe to plastic cards. He struggled with sticking tape to cards until his wife suggested using the heat of an iron to melt it on, which worked [2]. IBM led the standardization of this technology in 1969. It became a US standard that year and an international standard two years later in 1971 [2]. While this allowed cards to work anywhere in the world, it also meant the data inside was readable in the same format everywhere. Because magnetic stripes store data in a readable form, copying that data onto another card creates a counterfeit. This is called skimming [3]. It is similar to copying a notebook with a photocopier, though the machine mechanics are different. Next, we might consider adding marks to the card itself that could not be copied.
3. Why Dai Nippon Printing’s Holograms Are Hard to Copy
Holography was invented by Hungarian physicist Dennis Gabor in 1947 [4]. It records interference patterns created by overlapping two beams of light onto film. When light hits the film, it recreates a three-dimensional image. This is used to prevent counterfeiting on credit cards and banknotes. Holograms change appearance when tilted. They require special technology and materials that use light interference, so they cannot be reproduced by copiers or printers, according to explanations from Dai Nippon Printing [5]. However, this explanation applies to their specific holograms and may not apply to every card hologram. Holograms help people spot fakes by hand. But if the data inside the card is copied, visual marks alone may not stop fraud. A system was needed to make the data itself useless if copied.
4. IC Chips Create a New Code for Every Transaction
Cards with IC chips create a new cryptographic value, called a cryptogram, for each transaction. This is part of the international specification managed by the organization EMVCo [6]. In this description, the cryptogram is unique to each transaction and cannot be reused for the next one. It is like changing a password every time, but instead of saying words, the system exchanges calculated values. Rakuten Card explains that IC chips store important information with high-level encryption, making it extremely difficult to counterfeit or analyze the card [3]. In Japan, the deadline for supporting IC transactions in face-to-face dealings was set for the end of March 2020, and progress followed the action plan [1]. However, IC chips did not reduce counterfeit fraud to zero. The next section looks at the breakdown of losses in 2024 and 2025.
5. Counterfeits Are About 1%; Most Losses Are Online Number Theft
According to the Japan Credit Association, total fraud losses in 2024 were 55.50 billion yen. The breakdown was 590 million yen from counterfeits, 51.35 billion yen from number theft, and 3.56 billion yen from other causes. This means number theft was about 92.5% and counterfeits were about 1.1% [7]. In 2025, total losses were 51.05 billion yen, down 8.0% from the previous year. Counterfeits were 720 million yen, up 22.0% from the year before, while number theft was 47.54 billion yen, down 7.4%. Counterfeits made up about 1.4% [8]. Counterfeits have not disappeared; they go up and down each year. To protect non-face-to-face transactions, EMV 3-D Secure is used. The card issuer and store exchange information about the purchase and device, allowing the issuer to quickly detect and stop fraudulent transactions [9]. The breakdown shows that number theft is the main source of loss, making the protection of online transactions a challenge.
6. Looking at Holograms and IC Chips on a Card
Ask an adult to show you one card. You only need to look at the hologram or chip, not the number. Cover the number and expiration date with your fingers, and only look at cards your family allows. Do not show them to others or take photos. Tilt the card to see if the hologram changes. Then, find the IC chip (the gold square part) and the black band on the back (the magnetic stripe). Note that some cards do not have holograms. Seeing how these three protections sit on one card connects the article to real objects. For more reading, look at IBM’s history of the magnetic stripe [2] or EMVCo’s explanations [6][9].