Global payment card fraud, which had been growing at a slower rate in the last few years, appears to have picked up again in 2020, according to the Nilson Report.
In November 2019, the industry newsletter previously reported that the growth of global payment fraud peaked at 7.15 cents for every $100 of transaction volume in 2016. At that time, card fraud was projected to grow at a declining rate through 2027.
But the spread of COVID-19 upended those projections, at least in the short term. While card fraud losses were down to 6.78 cents for every $100 of volume in 2019, card fraud is expected to rise to 7.1 cents for every $100 of volume, the Nilson Report stated in its December 2020 issue.
Among the potential culprits are the continued growth in account takeover and so-called friendly fraud. The trend has prompted calls for financial services providers to ensure that robust security measures are tightly integrated into the user experience.
Friendly fraud is when a family member or acquaintance in possession of account or card details makes unauthorized purchases, usually online. Indeed, with the coronavirus pandemic driving an increase in internet shopping, it’s not hard to see why this type of crime might be on the rise.
Account takeover fraud, aka social engineering fraud, is when a stranger manipulates an account holder into sharing details, enabling them to access the victim’s funds. In February, global cybersecurity experts Kaspersky showed that half of all fraudulent transactions in 2020 were in this bracket.
Claire Hatcher, head of business development for Kaspersky Fraud Prevention, said: “Bank clients always place a high value on ease of access to their accounts and performance of usual financial operations, and now this has become especially important. That is why we believe that solutions for the financial industry should provide a high level of security measures — including protection against fraud — which are seamlessly integrated into the user experience.”
Kaspersky’s research also revealed that fraudsters were using legitimate remote access tools to steal personal information.
The slowing growth of global payment card fraud before the pandemic has been at least partially attributed to the spread of EMV chip cards. Merchants who accept EMV chip technology for both traditional and contactless payments enjoyed a 87% drop in fraud since their inception in 2015, according to Visa.
More rigorous transaction authorization and customer authentication policies, which are supported by newer, more flexible card issuing technologies, have also proven effective in helping to thwart fraudsters.
Modern card issuing platforms like Marqeta give card program owners the ability to limit transaction approval based on dynamic spend controls ranging from location, time of purchase, merchant type, and more. Marqeta’s JIT Funding features allows card programs to control authorizations in real time.
In addition, Marqeta’s 3D secure solution offers additional protection in CNP (card not present) transactions such as online and mobile. A security protocol created by EMVCo (a standards body supported by card networks, processors, vendors, and other stakeholders), 3D secure provides a way for card issuers to require a cardholder to provide additional verification such as a one-time password or a fingerprint or facial scan.
Regulations such as the European Union’s new Secure Customer Authentication requirement support adoption of 3D secure and/or similar risk-reducing payment technologies. As a result, the advantage fraudsters currently hold over industry players may be short-lived. By 2027, the Nilson Report forecasts, the rate of fraud will have fallen from 7.1 cents per $100 in volume today to 6.1 cents.