Fraud losses could set new record in 2017
Card fraud loss trends dipped in 2016, but escalating losses in 2017 hint that it could be a record year for fraud, according to a press release.
Robert Jarosinski, senior consultant for risk and compliance solutions at CUNA Mutual Group, told a CUNA conference audience recently that despite new fraud-fighting tools and technologies, criminals continue to have the upper hand.
An October 2016 Nilson report said that card fraud will grow an additional 42 percent by 2020 — in addition to the 20 percent increase experienced in 2015. Nilson projects that worldwide fraud losses will total $31.67 billion by 2020.
One reason: Gas station adoption of EMV has been pushed back to 2020, three years later than originally planned. Also, card issuers will no longer be allowed to charge back non-EMV merchants for purchases under $25 and can only charge back 10 fraudulent transactions per account.
Familiar attacks such as card skimming and data breaches continue to be troublesome: "FICO reported card skimming losses were up 70 percent in 2016 compared to 2015, and that's on top of a whopping 546 percent year-over-year increase from 2014 to 2015," Jarosinski said.
Likewise, systemic and procedural problems with card verification values used for online purchases are driving up losses for card-not-present transactions.
At the same time, new fraud trends are emerging, the release said. Fallback fraud occurs when an EMV transactions cannot be completed at a chip-capable terminal and is proceed as mag stripe transactions, with any fraud liability falling on the issuer.
Another emerging trend, "friendly fraud," occurs when legitimate members knowingly or unknowingly make false claims to their card issuer about a purchase.
Jarosinski urged the audience to establish success metrics for fraud, including false-positives. "Work with your processor to get the information you need to evaluate the cost of fraud vs. the cost of solutions, and know the available levers you can use to make changes."