Rippleshot Blog

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. 

"Card issuers walk a fine line between alerting and alarming consumers who could become victims of cardholder fraud because of breaches."

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.

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. 

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. 

It’s no secret that AI, machine learning and big data are going to transform how financial institutions protect their customers from the influx of card fraud that continues to rise each year. Fraud and fraud patterns are evolving and change more rapidly than financial institutions can keep pace with. That’s where better data analytics tools bridge the gap by helping financial institutions detect breaches, risk and fraud faster, and at their source.

Industry data from the first quarter of the year shows what many financial institution leaders probably fear: CNP and mobile fraud are still rising rapidly.

As we covered in our 2019 Card Fraud Trends webinar, mobile fraud has increased by 600% over the last 3 years. As fraudsters find new avenues to target, fraud trends will continue to shift and financial institutions will have evolving issues to manage as they craft their annual revenue and customer impact goals. 

Data from RSA Security indicates Q1 fraud attacks involving rogue mobile applications jumped nearly 300%, while fraudulent CNP transactions jumped 17%. Within those incidents, 56% of the fraudulent transactions originated from mobile devices. Fraud attacks from "rogue mobile applications" increased 300% — up from 10,390 rogue apps in Q4 to 41,313 in Q1 of 2019. And that's just those they track — showing just a slice of the whole picture.

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 breach figures in the market show that April "saw the highest amount of data breaches and the highest amount of sensitive records exposed," according to the ITRC's report. Since the start of the year, the number of sensitive records exposed continued to rise rapidly each month. 

"One million sensitive records were exposed in January 2019, which was then doubled in February 2019 to 2.4 million sensitive records, followed by a jump in March 2019 to 3.6 million sensitive records exposed, followed again by another jump in April 2019 to 4.5 million sensitive records exposed, showing the steady increase in records exposed per month in the year 2019," according to the report.

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 on Thursday, May 2, is now available to listen to at your convenience. 

Topics covered include:

• What Banks are Concerned About Most

• Emerging Trends

• Preliminary Fraud Benchmarks 

• Assessing Readiness Guidelines

• Internal Checklist for Banks 

 With the first quarter of 2019 behind us, we're starting to get a better picture of the trends that will define this year's card fraud narrative. Of course, with eight months left in the year, there's plenty of time for new threats to emerge across the card fraud ecosystem. 

The real question on every financial institution leader's mind is how they can get ahead of the fraud trends in order to reduce their fraud losses, reissuance costs — all while minimizing customer impact. The number of data breaches isn't increasing, but the impact of them certainly is. That's why it's so imperative to get ahead of the next big threat.

Rippleshot Co-Founder Canh Tran will share his take on the latest card fraud trends in a webinar with the ABA on Thursday, May 2 at 2 p.m. EST. Topics covered in this webinar include:

• What defined 2018’s state of card fraud story
• What’s in store for 2019
• How bank leaders can determine where they stand
• How to assess your own fraud performance against the market

Synthetic identity fraud continues to be a hot topic across the financial ecosystem. The Fed is taking a deeper dive into this subject in a webinar today, April 23 at 11 a.m. EST, titled 'Ask the Experts: Synthetic Identity Payments Fraud.'

Among the featured panel members will be Justin Davis, fraud manager for Digital Federal Credit Union. Learn what this team of experts has to say on this subject. 

Keeping up with card fraud means anticipating what's going to be the next big problem. Understanding patterns and trends are a core component of this puzzle. Of course, that's why a fraud analytics platform like Rippleshot exists. But the Rippleshot team is also here to be your resource for keeping up with the latest trends in card fraud and understanding how they're evolving.

To keep you updated with what you should know, we've gathered a list of six resources worth bookmarking when you're looking to learn the answers to what's motivating fraudsters this season and what's likely going to be the next big trend that banks and credit unions must monitor. Check back weekly for new reports on trends that are impacting the payment fraud ecosystem. 

In an era of rising card fraud and data breaches, credit union leaders are constantly analyzing how they are protecting themselves, and their members. One of the biggest problems today? Waiting for network alerts can be costly in terms of fraud loss and customer experience.

That was one perspective Rippleshot’s Customer Success Manager Jesse Sherwood shared in a webinar she recently participated in hosted by CUNA Mutual Group titled “Managing Risk Through Big Data, Analytics & Machine Learning.” Managing that risk, Sherwood said, starts with determining how data can be used to identify and act on fraud sooner.

“When we are thinking about data, we have to start with the problem. What problem are we trying to solve?,” Sherwood said during the webinar. “Data breaches are becoming more and more common and at very large scale. What this means is credit unions and members are being impacted. How do we protect them?”

The answers to those questions start by determining what tools can help credit unions boost fraud prevention performance.

The latest report from the Federal Reserve Board of Governors provides insight into how card fraud trends are impacting issuers, specifically related to debit and prepaid card fraud losses.

The latest report, issued March 21, 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 the last quarter of 2018, Rippleshot’s State of Card Fraud highlighted account takeover fraud as a rising trend for financial institutions to watch. We predicted it would define one of the major hurdles for FIs. The latest report from Javelin Strategy & Research provides deeper insight into how that problem is evolving.

The 2019 Identity Fraud Study, released this month by Javelin, indicates existing card fraud losses from $6.4 billion from the $8.1 billion seen in 2017. That doesn’t mean the fraudsters are staying quiet. In 2017 alone, account takeover jumped 300 percent. What's contributing to this rise is the ability for cyber criminals to gain access to bank accounts easier than a credit card.

As fraudsters target new account openings and mobile account takeover tactics, these are fraud trends worth paying attention to over the next few years. Account takeover accounted for $4 billion in losses, which was slightly down from the year prior ($5.1 billion), but was up significantly when compared to data in recent years. Overall, fraud incidents and fraud losses hit $14.7 billion in 2018. There's a number of factors contributing to these trends. 

When your organization is part of a data breach as big as Equifax and Marriott, expect to stay in the headlines. Those two corporations continue to be under a congressional review microscope following the incidents that left millions of consumers’ data exposed.

The Senate Permanent Subcommittee on Investigations has been probing these breaches and its members have been vocal about the lack of oversight in protecting people’s personal and financial credentials. Members across party lines called on the organizations to do better to proactively protect their customers’ data. These discussions have also spurred conversations across the financial services industry.

"When hackers are able to obtain someone's personal information, the consequences are real," said Democrat Sen. Tom Carper. "The constant stream of data-breach notifications we see year in, and year out, is a sign we could be doing better."

“I think it’s long past time for us to come to an agreement on a federal data security law that lays out for private industry what we expect from them, both in data protection and in data breach notification,” Carper noted.

This begs the question: "What's next for financial institution data breach regulation?"

It’s no secret that AI, machine learning and big data are going to transform how financial institutions protect their customers from the influx of card fraud that continues to rise each year. It’s why the Rippleshot team decided to bring a new solution to the market six years ago.

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. As everyone knows, card fraud is skyrocketing and reissuance costs are at an all time high as the price to produce EMV chip cards rises. Banks and credit unions are absorbing these costs, while still having to learn how to keep up at the rate fraudsters are evolving their techniques.

Our sales pitch will tell you all you need to know about why we believe in our mission of collaboratively fighting fraud with data. Through the power of machine learning and big data, we help banks and credit unions reduce fraud, decrease re-issuance costs, and minimize customer/member impact. The quick answer of how we do this is that we’re able to analyze millions of card transactions daily, proactively helping FIs detect where gaps exist and how then can address the biggest risks first in order to achieve those three core goals of any organizations highlighted above.