By July, most financial organizations are deep into the budgeting season for the upcoming year. Thinking where new technology solutions — particularly fraud detection and mitigation tools — is a critical part in shaping a strategic plan for getting ahead of unforeseen threats.
In 2019, with data breaches and emerging fraud tactics driving daily headlines, determining how to integrate more sophisticated solutions has become part of the larger story in arming fraud teams with the right tools to proactively combat these rapidly-growing problems. Here at Rippleshot, we're here to join your team in the fight against card fraud — but we're also here to help educate the marketplace on the latest and greatest trends impacting this complicated and ever-evolving industry.
Over the past six months, we've dove into what's impacting banks and credit unions most and what fraud teams can do about these increasingly expensive and complex issues. As you prepare your 2020 technology budgets, we've broken down what's defined the first half of 2019 and what this means for next year's plans.
- Growing person-to-person fraud (through apps like Zelle and Venmo)
Increased attempts to fraudulently provision accounts for digital wallet/ACH payments
- Rising Card-Not-Present/eCommerce fraud
- Card Present Fraud (especially that which originates at Automated Fuel Dispensers)
- ATM breaches
CNP FRAUD LOSSES TO HIT $130 BILLION OVER FIVE-YEAR PERIOD
Reports from Juniper Research indicates that eCommerce retailers are in store for a storm of card-not-present (CNP) fraud over the next 5 years.
The research indicates that retailers should expect to see CNP fraud losses around $130 billion between 2018 and 2023. More sophisticated fraudster techniques, coupled with a delayed rate at which merchants invest in the latest FDP solutions as eCommerce transactions increase, is what's contributing to the record-setting fraud loss estimates.
Juniper's analysts suggest that merchants are hyper focused on fraud risks at the point of transaction, but are less focused on investing in behavioral monitoring technology, or having the means to validate identities of a specific user to prevent the fraud risk before the transaction occurs. That disconnect, the report suggests, is what is leading to an increase in CNP fraud. FDP solutions are often seen as a "high-cost-tool used only to prevent fraud." What's lacking is an investment in tools that understand behavioral patterns, the report noted. READ MORE.
THE YEAR AHEAD: WHAT FRAUDSTERS ARE TARGETING
For financial institutions, preparing for the year ahead means knowing what industry trends are gaining traction. Companies are catching on about what they need to do to prepare for data breach threats, but there are still gaps. Experian dug into how threats have evolved in its report, “2019 Data Breach Industry Report Forecast.”
"Cybercriminals are increasingly becoming more sophisticated and it's a constant game of cat and mouse,” the report detailed. Biometrics, skimming fraud monetizing data across the dark web were named as three threats defining 2019, Brian Stack, Vice President of Dark Web Intelligence at Experian, explained a little deeper about the “low risk, high yield proposition for cybercriminals,” that’s occurring. With easier access to droves of data on the Dark Web, at increasingly cheaper prices, fraudsters are able to monetize their efforts at a greater scale than ever before. READ MORE.
FED'S DATA ON DEBIT AND PREPAID CARD FRAUD LOSSES
A report this year from the Federal Reserve Board of Governors provided insight into how card fraud trends are impacting issuers, specifically related to debit and prepaid card fraud losses.
The report compiled the latest available data on interchange fee revenue and issuer fraud losses as it relates to debit transactions to provide FIs with an overall outlook into how fraud patterns are shifting and how EMV chip card adoption is impacting counterfeit card fraud.
In general, the report concluded that fraud losses as a share of transaction value jumped almost a basis point in two years. According to the report's summary: "Across all debit and general-use prepaid card transactions for covered issuers, fraud losses to all parties as a share of the transaction value were 11.2 basis points, or $11.20 per $10,000 in transaction value, up from 10.3 basis points in 2015." What's driving this shift? READ MORE.
HOW DOES YOUR ORGANIZATION STACK UP AGAINST YOUR PEERS?
There's a common question we hear a lot in the market: How does my fraud performance compare to my peers? Are my fraud losses higher or lower than others? What about reissuance costs?
Insight into these questions was part of the our latest webinar with the ABA. In this webinar, "State of Card Fraud 2019: How Does Your Bank Stack Up?", Rippleshot Co-Founder Canh Tran dives into what happened in 2018, how this is shaping the first quarter fraud trends for 2019 and what we predict is going to shape the rest of the year. This webinar, which aired in May, is now available to listen to at your convenience. READ MORE.
LEADING DATA BREACH METHODS: What's Setting Records
Data breach trends are constantly shifting as fraudsters find new tactics to expose sensitive data that leaves consumers increasingly vulnerable to issues like credit card fraud and identity theft. Knowing how to get ahead of these issues starts with knowing where the problems originate.
The latest data from the ITRC seems to align with what the industry is reporting, suggesting that 2019 could be experience another record-setting year for data breaches. During the first quarter of 2019 alone, cyber analytics firm Risk Based Security's data showed that over 1.9 billion records have been exposed across 1,903 publicly disclosed data compromise events — a 56% increase, according to their data.
This year's figures are the highest to-date when compared to both 2017 and 2019. While hacking was the leading cause of breaches in past years, this year's research showed unauthorized access to data was the leading cause of records being exposed. READ MORE.
CARD FRAUD TRENDS: MOBILE DEVICES DRIVING CNP, ACCOUNT FRAUD
Data from RSA Security indicates fraud attacks involving rogue mobile applications jumped nearly 300% in one quarter alone, while fraudulent CNP transactions jumped 17%. Within those incidents, 56% of the fraudulent transactions originated from mobile devices. CNP fraud transactions continue to top the list of concerns for financial institutions, and the latest industry data demonstrates why organizations continue to work to tackle this rapidly-growing problem.
"The average value of a CNP fraud transaction in the U.S. was $403, nearly double that of an average genuine transaction of $213," the report concluded. Account takeover was another rising trend highlighted in the report: “Sixty percent of fraud transaction value originated from a new device but trusted account indicating account takeover activity continues to be a preferred and successful attack vector for cybercriminals.” READ MORE.
HOW DATA ANALYTICS HELP FINANCIAL INSTITUTIONS PROACTIVELY FIGHT FRAUD
In an era of rising card fraud and data breaches, financial institution leaders are constantly analyzing how they are protecting themselves, and their customers. One of the biggest problems today? Waiting for network alerts can be costly in terms of fraud loss and customer experience.
When relying on network alerts, by the time the information about fraud or a breach is realized, the amount of fraud loss and compromised card fraud can reach high levels. That’s where the power of fraud analytics, big data and machine learning comes into the mix. Financial institutions are getting faster and better at preventing, detecting and stopping fraud, thanks to help from more sophisticated software. But fraudsters are getting faster. That’s where better data analytics tools bridge the gap by helping financial institutions detect breaches, risk and fraud faster, and at their source. READ MORE.
FINANCIAL FRAUD DRIVES MULTI-FACTOR AUTHENTICATION MARKET
Fighting the rise of payment fraud and cyber attacks has also fueled the growth of the fraud prevention, detection and risk mitigation markets. Among those trends is the multi-factor authentication market that continues to see new investments as financial fraud rises.
A new report from Adroit Market Research indicates that by 2025, the multi-factor market will be worth roughly $20.41 billion — a growth of roughly 24% over the next six years. In North America alone — the top multi-factor authentication market — it's already more than a $1.8 billion industry. READ MORE.
WHERE MACHINE LEARNING FITS INTO THE 'FIGHT AGAINST CARD FRAUD'
Using more sophisticated technology to manage potential compromised card fraud was the basis of the latest article featured on FIS Payments Leader, titled "New Machine Learning Tools Advance the Fight Against Card Fraud." Dondi Black, VP of Payment Strategy for FIS, details how machine learning tools can deliver greater accuracy when it comes to fighting card fraud — and in a way that lessens the impact on the customer experience. The key to achieving the outcomes desired today by bank and credit union fraud and risk managers? Early detection.
Bank leaders, she notes, must balance "alerting and alarming customers" in order to keep customers feeling safe about their own financial data. Blindly reissuing can trigger a process that is both ineffective and expensive, which can also create more customer churn. READ MORE.
Inside Synthetic Fraud: A Deep Dive
Synthetic fraud is estimated to cost lenders more than $6 billion annually — and by all accounts, this problem is going to get worse before it gets better. But why is synthetic fraud ballooning – and why are financial institutions finding it increasingly harder to crack down on? A rise in data breaches in recent years has only complicated this problem even more.
Synthetic fraud allows hackers to set up accounts in a person’s name that appear to be authentic, but are in fact fictitious. The construction of new synthetic IDs is based on combining truthful and false information to build a credit file and then open new accounts, which is perpetrated at scale by opening hundreds of new accounts. Since fraudsters don’t need as much personal information as credit card fraud, cyber criminals have shifted their attention to this type of fraud. To help keep FIs educated with the latest data available in the market — and share expert’s take on how this problem has been transforming — we released a white paper. READ MORE.