FICO Sees 25 Percent Jump in Cross-Border Fraud on UK Debit Cards in 2014

Nearly half of cross-border UK debit card fraud occurred in US

LONDON — June 25, 2015

Highlights:

• 25 percent rise seen in cross-border fraud transactions on UK debit cards from 2013 to 2014
• 47 percent of fraudulent cross-border transactions on UK debit cards occurred in US in 2014
• 12 percent of UK debit card fraud was from cash machines
• 67 percent of UK debit card fraud was card-not-present
• Data used to update models for FICO^® Falcon^® Fraud Manager

The percentage of fraudulent transactions occurring outside the UK in 2014 on UK debit cards rose 25 percent in a massive sample of cards studied by analytic software firm FICO. Fraudulent cross-border transactions accounted for nearly a third (31 percent) of all fraudulent transactions on 52 million active UK debit cards studied by FICO, up from 23 percent in 2013. Cross-border transactions overall nearly doubled between FICO’s 2013 sample and 2014 sample.

"Criminals are now opting for card-not-present and cross-border fraud," said Martin Warwick, FICO's fraud chief in Europe, the Middle East and Africa. "The alarming rise in cross-border fraud demands new technology, such as proximity location services that can identify whether the customer's mobile is in the same place where the transaction is occurring. The UK reduced cross-border card fraud from £230 million in 2008 down to £80 million in 2011. But cross-border fraud has nearly doubled since then, and it’s time to get it back under control."

As the US experiences an unprecedented spike in fraudulent ATM cash-outs, FICO reported that the US accounted for 47 percent of the fraudulent cross-border transactions seen on UK debit cards in 2014 in its sample. While it ranked first for the number of fraudulent cross-border transactions on UK cards, the US ranked only third for the number of total cross-border transactions.

"Lack of EMV technology in the US makes it a target for criminals," said Warwick. "Criminal organizations are taking the details of compromised UK-issued debit cards and using those fraudulently in the US. This can affect anyone with a UK card that has been compromised, not just those who travel to the US.

"We are seeing a lot of fraud in the US as criminals try to exploit the lack of EMV protection before it is implemented in the US, and before the liability shift at the point of sale takes effect later this year. Having EMV will make the mag stripe data less appealing to criminals."

The cards in FICO's sample represented 5,6 billion total transactions worth £306 billion, a 5 percent increase in spending compared to 2013. Total fraud losses for the cards in the sample decreased 7 percent, to £156 million.

While 24 percent of debit card transactions occurred at cash machines, just 12 percent of fraudulent transactions came from cash machines. Still, cash machines topped the list of merchant categories for fraudulent debit card use, followed by financial institutions at 12 percent.

Fraudulent transactions where the card was not present (CNP) accounted for 68 percent of all fraudulent debit card transactions, and 84 percent of cross-border fraud transactions. With respect to fraud losses, CNP accounted for 63 percent of total fraud losses and 57 percent of cross-border fraud losses. CNP fraud transactions decreased by 3 percent but fraud losses remained flat at £98 million between the two periods.

"Advances in anti-fraud analytics, like those found in FICO Falcon Fraud Manager, coupled with improvements in the infrastructure such as EMV, have taken a massive bite out of the fraud losses in the UK," said Warwick. "But although most cards in the UK are chip cards, chip transactions from these cards account for only 28 percent of fraud. As in other markets, fraud has moved online."

FICO studied 52 million active UK debit cards in its Falcon Fraud Consortium, and tracked trends from 2013 to 2014. The data was used to develop the new debit card models in FICO^® Falcon^® Fraud Manager, which protects more than 2,5 billion cards worldwide.

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