FICO Data Shows Credit Card Fraud Rising in Germany

Fraud is growing faster than card spending – travel and tourism sector particularly affected

MUNICH — May 7, 2015

Highlights:

• 17 percent increase in credit card fraud losses observed in a sample of 7,5 million cards
• Total card purchases rose just 5 percent
• 70 percent of card fraud was card-not-present, 80 percent was cross-border

New analysis from FICO, the predictive analytics and decision management company, shows that credit card fraud increased last year in Germany. In a sample of 7,5 million active cards issued in Germany, FICO found that losses due to fraud increased by 17 percent in the year from October 2013 to September 2014, compared to the previous year. This growth outstripped the growth in total card purchases, which rose just 5 percent. The number of successful fraudulent attempts rose by as much as 30 percent, while total authorized transactions rose just 8 percent.

"All in all, fraud in Germany is running at a low level,” said Martin Warwick, FICO's fraud chief in Europe. “On the 270 million transactions we studied, fraud accounts for just 0,07 percent of transactions, and fraud losses represent just 0,1 percent of total sales. But the rate at which fraud is increasing is high, and warrants renewed attention from issuers.”

Warwick considers it significant that the number of fraudulent transactions rose faster than fraud losses, which means the average loss per incident is lower. "Criminals are constantly adapting their strategies,” Warwick said. “It looks as if they are targeting transactions in smaller amounts, presumably because they think it is easier to avoid counterfeit transactions being detected.”

Online and Cross-Border Fraud Dominate
The twin trends driving card fraud higher were card-not-present (CNP) fraud, which includes online card purchases, and cross-border card fraud. CNP fraud accounted for around 70 percent of the card fraud seen in the FICO sample, and cross-border fraud accounted for 80 percent. (Many incidents were CNP and cross-border.) While most German-issued cards have chips, chip transactions (such as at a retailer’s card reader) accounted for only 10 percent of the fraud.

"These figures reflect two important insights," Warwick said. "Firstly, the introduction of chip-based cards is an important part of combating fraud. But it's not enough - because CNP transactions don't rely on physical card security measures, that is where the criminals are going. The industry needs to adopt the latest analytics to detect fraud in CNP transactions, and be even more rigorous around data security, as today's data theft is tomorrow's fraud."

Criminals favored travel-related purchases in the sample analyzed. Travel agencies and tour operators (16,1 percent), airlines in general (4,5 percent), as well as hotels and other accommodation (3,1 percent) all together report around one quarter of fraud losses.

Analysis Part of New FICO Models
FICO’s new research is based on analysis of data from German card issuers using FICO^® Falcon^® Fraud Manager, which guards one in three cards in Germany. Data on these cards is reported to the FICO Falcon Fraud Consortium and used to develop regional predictive models for FICO Falcon Fraud Manager. FICO Falcon Fraud Manager is the world’s leading solution for card fraud management, and protects more than 2,5 billion active payment cards worldwide. 

Über FICO
FICO (NYSE: FICO), formerly known as Fair Isaac, is a leading analytics software company, helping businesses in 90+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. Der zukunftsweisende Einsatz von Big Data und mathematischen Algorithmen zur Erstellung von Prognosen zum Kundenverhalten hat ganze Branchen grundlegend gewandelt. Die Analytics-Softwarelösungen und -Tools von FICO werden in den verschiedensten Branchen verwendet, um Risiken und Betrugsfälle zu verringern, profitablere Kundenbeziehungen aufzubauen, Abläufe zu optimieren und strenge regulatorische Vorgaben zu erfüllen. Many of our products reach industry-wide adoption. These include the FICO^® Score, the standard measure of consumer credit risk in the United States. FICO-Lösungen integrieren Open-Source-Standards und Cloud Computing, um so maximale Flexibilität und schnelle Bereitstellung zu ermöglichen und Kosten zu reduzieren. Das Unternehmen hilft Millionen von Menschen dabei, ihren persönlichen Kreditstatus zu verwalten. FICO: Make every decision count™. Learn more at www.fico.com.

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