Banks in Singapore made the news across Asia this month, announcing plans to deactivate the magnetic strips on credit and debit cards by 1 October, 2013. These banks will begin using the harder-to-duplicate EMV chip technology. This security measure helps safeguard card users' account details, and prevent lost or stolen cards from being cloned by "skimming" syndicates.
The move by all 10 card-issuing banks in the island state was just the latest in the industry’s attempts to cut losses from fraud. The Association of Banks in Singapore (ABS) hopes to lock down losses from the more easily breached magnetic strip after the DBS Bank was hit last year by card skimming fraudsters that withdrew S$500,000 from its ATMs.
Interestingly, fraud is historically low in Singapore. However there has been an escalation of fraudulent activity elsewhere across Asia-Pacific. Card fraud rates are currently very high in many Asian countries, such as the Philippines, China and Indonesia.
Why is there such a striking difference in fraud rates across Asia? By employing stronger fraud protections, mature credit markets like Singapore have become less attractive to fraudsters. These criminals move from country to country, looking for the next best target—often in emerging markets. Successful scams are being replicated by organised crime from one geography to the next in rapid succession, in order to maximise gains and avoid getting caught. It really is a game of “Catch Me If You Can,” with criminal syndicates following the path of least resistance just like Frank Abagnale, the notorious cheque fraudster and Leonardo DiCaprio’s character in the film.
Increased intra-Asia travel is also driving up fraud risk region-wide. More consumers are venturing beyond their borders, fuelled by increased globalisation, a rising middle-class and more affordable travel. This provides greater opportunity for fraudsters to take advantage of travellers’ unfamiliarity with overseas vendors and lower vigilance in their use of credit cards.
FICO helps banks stay ahead of the game through the application of our anti-fraud solutions, which use the latest analytic techniques to help identify fraudulent transactions in real time. FICO’s fraud systems protect more than 2 billion credit cards worldwide, and that includes more than 15 million alone here in APAC.
However, with a third of the world’s population living in Asia, the chances of fraud remain vast. The problem of unauthorised transactions through card skimming will remain until a combination of physical security, robust analytics software and improved consumer awareness of scams improves across the region.
In the immediate term, Singapore banks must strike a fine balance between upholding the highest level of security and customer convenience. The EMV chip used in Singapore is, regrettably, not accepted by many merchants in other countries, including in Europe, Australia, Taiwan, Hong Kong and Malaysia. Hence, Singapore banks will be exempting from this measure those customers who were frequent travellers in the last twelve months.
Much like we saw with the cheque fraud in "Catch Me If You Can," if there’s an exemption or weakness in banking fraud defences, it can be exploited. Therefore, frequent travellers should be reminded to be vigilant when using magnetic strip cards at merchants and ATMS overseas. They should always keep their cards in view, watch for strange-looking equipment at ATMs, shield their PINs and only activate the magnetic strip if absolutely needed.