Card fraud rises globally: one in three consumers fall victim

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Card fraud rates are on the rise in many parts of the world despite the widespread adoption of fraud analytics solutions by financial institutions and retailers, along with EMV in most countries, according to a new global from ACI Worldwide and Aite Group.

The report 2016 Global Consumer Card Fraud – Where Card Fraud Is Coming From surveyed overCurrent Total Card Fraud Rates by Country 6,000 consumers across 20 countries. It reveals nearly thirty percent of global consumers have experienced card fraud in the past five years, classified as unauthorised activity on three types of payment cards (debit, credit and prepaid). 17% of respondents experienced more than one incident of fraud, compared to 13% in 2014.

The report warns that fraudsters worldwide are getting more sophisticated. It states that “the underground economy for user information has matured so much as to be indistinguishable from a legitimate economy.”

Widespread risky behaviours, such as leaving a smartphone unlocked when not in use, are another reason for rising fraud rates. According to the report, the overall risk for fraud is rising due to the global increase in smartphone and tablet usage. So-called application fraud is equally on the rise due to consumers publishing increasing amounts of private data on social media platforms.

“Our latest report shows that card fraud remains an issue of deep concern for consumers worldwide. As fraudsters are getting more organized it is fair to say that at this point in time, the assumption should be made that almost all users’ credentials and card information has been compromised,” says Andreas Suma, global lead fraud and data, ACI Worldwide.

“It is also no surprise that there is a direct correlation between fraud rates and consumer trust and loyalty. As our data illustrates, for financial institutions it is more critical than ever to implement effective fraud prevention solutions.”

Risky Behavior Trends in the Americas

Countries with the highest percentage of card fraud

  • In 2016, Mexico leads the way at 56%, followed by Brazil at 49% and the US at 47% (In 2014, the UAE, China, India and the US topped the list)
  • The US is the only country to remain in the top three list both years, due in part to being a laggard in the roll-out of EMV chip cards, so skimming and data breaches continue to be security challenges
  • European countries experience less card fraud than countries in the Americas, mainly due to earlier adoption of EMV* and other security advances; fraud rates for the UK were 29%, Italy 27% and Germany 18%

Risky consumer behaviour

The reports also reveals that risky consumer behaviour is still widespread despite years of education by financial institutions and card issuers. It is surprisingly high in Europe although fraud rates in these countries are often among the lowest worldwide.

  • 54% of global consumers exhibit at least one risky behaviour—such as keeping one’s PIN with the card—which puts them at higher risk of financial fraud, compared to 50% in 2014
  • 25% of French, 29% of Spanish and 21% of Dutch respondents said they had left their smartphone unlocked in the last five years when not using it
  • 20% of Spanish and 18% of Italian consumers have used online banking or shopping without security software on a public computer
  • 19% of Italian respondents admitted they had made a note of their PIN and carried it with them or kept it with their card

“The data demonstrates that while consumer trust is improving, financial institutions must be proactive in their efforts to prevent card fraud in order to retain customers,” said Ben Knieff, senior research analyst, Aite Group. “Consumer education and customer service remain a challenge for financial institutions, as risky behavior has a direct correlation to experiencing fraud.”

Consumer trust is improving, but loyalty is still lacking

  • 14% of global consumers lack confidence that their financial institution can protect them against fraud, down from nearly 20% in 2014
  • 40% of consumers who received replacement cards as a result of a data breach or fraudulent activity use their replacement card less than they used their original card, resulting in lost interchange and interest revenue from decreased usage
  • 1 out of every 5 consumers changed financial institutions due to dissatisfaction after experiencing fraud
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