US Card Skimming Grew Nearly 5x in 2022, New FICO Data Shows

Debit card skimming grew at the unprecedented rate of 368% from 2021 to 2022, but there are steps banks and consumers can take to combat compromised cards

by Debbie Cobb

Vice President, Product Management

February 16, 2023

In August of 2022, I explored the radical increase in card skimming for the first half of 2022. Now that we have data from the entire year to review, we are seeing the alarming trend continue.

For 2022, we saw a significant increase in compromised cards resulting from skimming activity. Total compromise cards were up 368% from 2021, with more than 161,000 impacted cards identified — nearly a 5x increase over 2021. Nearly 3,000 unique financial institutions (FIs) were affected by a compromise, representing a 79% year-over-year increase in affected institutions.

This growth trend is concerning not only for the FIs, but also for the consumers whose card details and account information are impacted. And the data from January 2023 is already trending at nearly 10x increase over 2022. Taken together, these statistics point to an issue that isn’t going away. Unfortunately, we expect to see high volumes of skimming points of compromise (POCs) and compromised cards this year as well.

Increasing In Volume, Impact

The jump in skimming activity was directly related to an increase in the number of POCs. Last year, we saw a 452% increase in POCs, illustrating that criminals are back in force and working to put a skimmer in as many locations as possible.

One striking fact about the increase in POCs was that 75% of the total compromise sites were new in 2022 (sites that had not been compromised before). While this alone should give pause, when combined with the fact that there were an average of 185 cards compromised per skimming event, banks and consumer should all be wary when using any ATM, point of sale terminal, or other location where a card skimmer could be potentially located.

Across the US, we saw clear geographic focal points for skimming activities. California earned the dubious distinction of the top state for skimming event locations, with 47% of the total for the year. A cluster of states in the northeastern US accounted for an additional 29%, and included New York, New Jersey, Pennsylvania, Maryland and Virginia.

When looking at total fraud cases related to skimming, we saw that 70% were tied to POCs in 5 states: California (38%), New York (16%), Pennsylvania (6%) and Florida/Washington (5%). Most of the skimming events happened in a relatively short time frame, with 64% taking one week or less, and 87% lasting two weeks or less. With this short timeframe, finding and disabling skimming devices can be nearly impossible, and many (if not most) consumers will not know that their information has been compromised until fraudulent charges show up on their card.

Consumers: Pay Attention to Detail

Fortunately, there are several specific actions that both FIs and consumers can take to minimize the impact of skimming.

As I mentioned in my last skimming post, consumers can pay close attention to PIN pads and payment terminals when using a credit card or a debit card. Anything that looks suspect, like weird keys on the keypad, a broken seal on the gas pump, or buttons that simply don’t feel right, should be red flags to move on or use another location.
Consumers can also take more advantage of tap-to-pay technology. By using this contactless payment method, consumers can take advantage of tokenization and encryption of card details, making it much harder for criminals to capture sensitive card information.
Chip and PIN transactions are more secure than swiping, but consumers will need to take care to cover the PIN pad while entering their number so that thieves cannot capture the unique PIN with a spy cam.
The least secure card payment method is swiping, as this will allow criminals with a skimmer in the terminal to capture all the card information from its magnetic strip. Often a compromised payment terminal will prevent a user from using anything other than a swipe, so if you encounter problems using contactless or chip and PIN methods, look for another card reader.

Banks Need Vigilance, Proactivity, And Technology to Protect Against Compromise

For banks and other FIs, knowing the signs of compromised cards are vitally important. We saw that in 2022, 58% of the attempted transactions in fraud cases were balance inquiries. Banks can use this information to define rule sets to increase monitoring or do proactive customer outreach in case of balance inquiries, helping to head off criminal activity before it results in losses.

Banks can also take advantage of detailed information contained in Compromised Card Reports (CCRs) and Suspect reports, available through the FICO Card Alert Service. Using the data from these reports, issuers can act immediately to address known compromised cards with tactics like block/reissue or implement strategies to increase monitoring of those cards for signs of fraudulent activity.

Knowing where skimmers are most prevalent is also a powerful piece of knowledge. With geographically specific strategies, issuers can define and implement rules that address the increased risk in distinct locations, or establish limits on transaction amounts in areas where skimming incidents are higher.

Proactive customer outreach is another excellent tool in the FI toolbox. Using real-time, two-way customer communication capabilities in the channel of customer choice (whether text, email, phone, or in-app messages), FIs can confirm whether a specific transaction was initiated by the consumer or whether it was a fraudster.

While skimming events can impact hundreds of unknowing individuals, criminals will also continue to target consumers through phishing, smishing, scams, and other tactics to obtain cardholder data that can be used for card-not-present fraud. Banks should deploy fraud checks prior to authorizing any purchase or payment transaction. AI- and ML powered models can help protect against credit card fraud, debit card fraud, and authorized user fraud related to scams.

How FICO’s Card Alert Service Can Help Fight Card Skimming Fraud

Read about the first half 2022 card skimming results from Card Alert Service.
Learn how Customer Communications Services for Fraud helps protect customers from fraud in real time
Learn more about FICO’s award-winning Retail Banking model 3.0 with scam detection score

Follow me on LinkedIn for more insights about FICO’s innovative fraud fighting efforts.

Debbie Cobb

Debbie Cobb is VP of Product Management, serving as the global product leader for FICO’s transactional fraud solutions including FICO Falcon Fraud Manager, FICO Falcon Compromise Manager and Card Alert Service. Debbie is responsible for the products’ strategic direction and enabling enterprise use cases across a global client base. Debbie has 25 years product management and product marketing experience in fraud management and financial services. Her roles have included developing a consumer authentication solution for Experian and managing credit and identity theft management applications. Debbie holds a B.A. from UCLA and an MBA from the Merage School of Business at University of California, Irvine.

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FICO’s latest research on <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-rising-the-beat-goes-on/" target="_blank">national FICO® Score distribution</a> shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “<a href="http://www.fico.com/en/blogs/risk-compliance/infographic-what-does-a-high-credit-scorer-look-like/" target="_blank">FICO® Score high achievers</a>,” where we examine the credit behavioural profiles of consumers with higher credit scores. As expected, our latest study showed that older people generally have higher scores, as has been the case in our <a href="http://www.fico.com/en/blogs/risk-compliance/age-before-beauty-credit-worthiness-before-youth/" target="_blank">past research</a>. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO® Score calculation</a>. But for younger consumers, it isn’t too helpful to say, “just wait until you are 50 years old, and that will fix things!” Thus, I decided to dive deeper with our analysis, including looking at the credit behavioural characteristics of younger consumers with high FICO® Scores. In this analysis, I looked at credit characteristics for the two highest score bands, 750-799 and 800-850, which have about 16% and 23% of the population, respectively. I further broke this down by looking at the characteristics of the youngest 15% in each group, which occurs at age 29 for the 750-799 group and 43 for the 800-850. We used FICO® Score 9 for our analysis, and examined typical variables of the categories that go into the make-up of the score. <a href="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png"><img class="alignnone size-full wp-image-29367" src="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png" alt="fico-score-high-achiever-table" width="715" height="747" /></a> Since there’s a lot to dissect in this chart, I’ll highlight a few findings that struck me: <ul> <li>Credit history. Higher scores are undoubtedly associated with a longer time on file. What’s striking is the higher average time on file for the 800+ group, both overall and for revolving accounts (the most common trade line). Clearly, it helps to start credit use early in life – but that’s not the sole determining factor for high scoring. The younger cohorts in both the 800+ and 750-799 groups have time on file medians significantly less than their older counterparts.</li> <li>New credit. High credit scorers do, in fact, pursue new credit. We see little variation in months since last trade line opening and last inquiry among all groups observed.</li> <li>Pay on time. As you might expect, the further in the past the delinquency, the higher the score – and that’s if a delinquency ever happened. 95% of the 800+ people and 72% of the 750-799 group have never been delinquent, which is a striking contrast to the 57% for the total population. The percentages for the younger groups are even higher, especially so for the 750-799ers. Collection items are also scarce for these high scorers. 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The 800+ group is roughly 1/4 of the national median, both in total and on their highest utilized card; they also have lower balances and more cards. The 750-799 group is more active and higher utilized, but still only at 2/3 of the national figures. The young 750-799 group compensate with lower revolving balances and, as a result, lower utilization, which is in line with what we see for the 800+ group.</li> <li>Benchmarks. I’d like to point out that while this study provides good benchmarks of the typical credit traits of the FICO® Score high achiever, individual credit profiles will vary widely. And keep in mind that when we sort groups of consumers as a whole by different behaviours, some results may look superficially odd. For example, the 800+ band has a longer median average open account time (128 months) than average revolving months on file (140 months).</li> </ul> So, what do we conclude? A huge takeaway is that high scorers don’t have too much in the way of serious delinquencies and negative public record data. In most respects, the young 800+ people are like their peer group. They really only differ markedly in their shorter credit history and higher non-mortgage balance, both of which are a function of life stage. Our results show that you don’t have to be a credit product hermit; these high scorers have more credit cards. The takeaway is to start credit activity early and maintain well-managed and moderate usage. In many ways, the young 750-799 people are more interesting because their age profile is much younger. Their credit characteristics differ more from their peer group, particularly in terms of length of credit history. They compensate by having almost pristine credit records and lower balances. Ultimately, 39% of US consumers are FICO® Score high achievers, which they accomplish by following common-sense credit practices. It ain’t rocket science!

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