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November 17, 2014
CNP fraud accounts for 74 percent of UK fraud losses
LONDON—November 17, 2014—FICO (NYSE:FICO), the leading provider of analytics and decision management technology, today announced that card-not-present (CNP) fraud accounted for three-quarters of card fraud cases and fraud losses in the UK from 2012-2014, based on the payment cards in the FICO® Falcon® Fraud Consortium for Europe. Despite the dominance of CNP fraud, UK issuers have used anti-fraud technology to keep loss rates below their 2008 level.
CNP fraud targets transactions made online or over the phone, where chip and PIN technology can’t be applied. Although losses to CNP fraud saw an overall increase in the two-year period ending in mid-2014, so did the number of card transactions, leaving the overall risk posed by CNP fraud the same as in previous years. Other types of fraud, including cross-border fraud, also remained consistent with previous years.
E-commerce spending in the UK more than doubled from £41 billion in 2008 to £91 billion in 2013, according to the UK Cards Association. However, CNP fraud losses fell in the same period, from £328 million to £301 million, according to industry data published in FICO’s 2013 European Card Fraud Map.
“If CNP fraud had kept pace with online spending since 2008, we would have seen 2013 CNP fraud losses of £728 million – 122 percent higher than they actually were,” said Martin Warwick, FICO’s fraud chief in Europe, Middle East and Africa . “This demonstrates the success UK issuers have had controlling fraud with both chip and PIN technology and the advanced analytics in FICO Falcon Fraud Manager. Criminals have not been able to achieve a sustainable advantage over the counter-fraud technologies.
“Nevertheless, criminals can be very clever as they seek ways to exploit weaknesses in payment systems,” Warwick said. “It’s important – for the sake of consumers, merchants and banks – to employ the most advanced and dynamic anti-fraud technologies to thwart them. It’s also important that cardholders remain vigilant and regularly check their statements to monitor spending on their cards and identify any potentially fraudulent transactions. We are working with banks and issuers to help them gain an even better understanding of individuals’ specific e-commerce behavior, so that our models detect more fraud with a minimum of false positives.”
The latest data from the Consortium also shows that travel-related merchants — from hotels to travel agencies — are the most likely places for fraudulent transactions.
“Most Europeans are aware of the importance of taking precautions when using an ATM, and of being vigilant when spending abroad,” says Warwick. “This latest data reinforces the need for cardholders to take care, and for card issuers to adopt the latest technology for identifying suspicious activity as early as possible.”
Percentage of total card fraud
Hotels, Motels, and Resorts
Travel Agencies, Tour Operators
Grocery Stores, Supermarkets
Eating Places, Restaurants
Airlines, Air Carriers
Men’s and Women’s Clothing Stores
Insurance Sales, Underwriting, and Premiums
Source: FICO® Falcon® Fraud Consortium for Europe
FICO’s data comes from card issuers in Germany, the UK, Ireland, the Netherlands, Poland and Switzerland. FICO analyzed this data to develop the latest UK / Ireland and European models for FICO® Falcon® Fraud Manager, which are available now to Falcon clients in Europe.
FICO (NYSE: FICO) 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.
FICO: Make every decision count™. Learn more at www.fico.com.
FICO, Falcon and “Make every decision count” are trademarks of Fair Isaac Corporation in the United States and other countries.
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