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Fraud-fighting measures working in UK, FICO says

Losses from card-not-present fraud increased, but so did the number of card transactions, leaving the overall rate unchanged, the company said.

November 18, 2014

FICO data analysis has revealed that card-not-present fraud accounted for three-quarters of card fraud cases and fraud losses in the U.K. from 2012 to 2014, based on payment cards in the company's Falcon Fraud Consortium for Europe. But despite the dominance of CNP fraud, U.K. issuers have used anti-fraud technology to keep loss rates below their 2008 level, a FICO news release said.

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, the company said. Other types of fraud, including cross-border fraud, also remained consistent with previous years.

E-commerce spending in the U.K. more than doubled from 41 billion pounds ($64 billion) in 2008 to 91 billion ($142 billion) in 2013, according to the U.K. Cards Association. However, CNP fraud losses fell in the same period, from 328 million pounds ($513 million) to 301 million ($485 million), according to industry data published in FICO's 2013 European Card Fraud Map.

Martin Warwick, FICO fraud chief in Europe, the Middle East and Africa, provided context for the numbers:

If CNP fraud had kept pace with online spending since 2008, we would have seen 2013 CNP fraud losses of 728 million pounds ($1.14 billion) — 122 percent higher than they actually were. This demonstrates the success U.K. 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. ...

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: