FICO report shows cross-border and card-not-present fraud predominate
LONDON — July 22, 2015
- Card fraud losses rose six percent across Europe in 2014, and in UK
- 70 percent of UK card fraud losses were due to card-not-present fraud
- Cross-border fraud dominates in UK
- France had highest card fraud losses relative to sales
- Analytics, EMV are key to controlling card fraud
- FICO analysis of fraud in 19 countries is based on data from Euromonitor International
Card fraud losses across 19 countries in Europe rose an average of 6 percent in 2014, according to a new report from analytic software company FICO based on data from Euromonitor International. But the low overall rise masks large shifts in so-called "cross-border" fraud, where criminals use data on cards from one country to commit fraudulent transactions in another country.
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UK card fraud losses rose by £29 million in 2014, a 6 percent rise on the previous year. Most of this increase was due to cross-border fraud, with domestic losses remaining flat.
In the UK, FICO previously reported a 25% increase in cross-border fraud on debit cards in 2014, compared to 2013. 47% of the fraudulent transactions were taking place in the US — a pattern that seems related to the delay in US adoption of EMV technology. The first wave of the EMV liability shift takes place in October 2015 in the US.
"Banks in the UK and most of Europe adopted EMV technology years ago, so it may appear that they have little to worry about from mag-stripe fraud," said Martin Warwick, FICO's fraud chief for Europe. "However, the trends suggest that any European plastic card can be targeted, as criminals try to 'fill their boots' before the US finally shuts the door on skimming fraud."
As reported in the FICO European Fraud Map for the last three years, the leading type of fraudulent card transaction is so-called card-not-present (CNP) fraud. The percentage of fraud losses from CNP fraud averaged 41 percent for Western European countries, and 23 percent for Eastern European countries.
In the UK, ecommerce spending in the UK more than doubled between 2008 and 2014, but CNP fraud losses have grown just 1 percent in that time. However, it has become a greater share of UK card losses, rising from 54 percent of card losses in 2008 to 70 percent in 2014.
"We are winning the war on CNP fraud, but we still have a long way to go to get CNP fraud fully under control," Warwick said. "Authentication of customers and their devices will play an ever-increasing role.This is why FICO has been focused on advances in analytics that assess consumer behavior, and profile not just cardholders but also devices and merchants."
Highest Fraud Rates
France had the highest card fraud losses relative to card sales, followed by Greece and the UK, which is the same ranking as last year. Russia saw the fastest growth in card fraud losses – 24 percent — but card sales in the same period grew 36 percent.
"Any market that is growing will attract criminals attention and that's exactly what is happening in Russia," Warwick said. "EMV has a long way to go to reach maturity in Russia. However, overall Russia has low fraud relative to sales. The key aim for banks will be to ensure that when growth in sales slows they are also in a position to slow the growth in fraud losses".
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. The company's groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. 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 solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. Learn more at www.fico.com.
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