Across the payments ecosystem, fraud continues to be the increasingly complex and expensive problem that all financial institutions are attempting to tackle. To understand how payment fraud is evolving, FIs must identify the origin of the problem itself.
A new report by Javelin dove into leading card fraud trends, the greatest threats to financial institutions and what strategies can help curb the rise of payment fraud. The report highlighted some core issues in the payment ecosystem and how these problems have transformed over the past year.
- Application Fraud hit $1.7 Billion | The number of fraudulent accounts being opened continue to rise. 2017’s figures were up .9 million.
- Fraud is Shifting | Although transaction fraud losses are slowly falling, thanks to EMV, this is shifting fraud to debit and prepaid cards. The amount of prepaid card fraud rose 3 times in 2017 from 2016’s figures (to 3.4 million people). The number of debit card fraud victims rose to 6.6 million. Online fraud continues to be a rising problem.
- ID Verification Systems Aren’t Working | Synthetic ID fraud and automated attacks are on the rise. Fraudsters are using personally identifiable information to determine identities quicker. Financial institutions are at an increased risk to new account fraud as a result.
- Data Breaches of Any Type Increase Risk | More data breaches means more personal details of consumers are at risk for being used for fraudulent activity. These credentials continue to be sold on the dark web.
- Private Label Cards are a Major Target | Gaining access to credit lines has become a greater problem for those that originate from POS card originators, particularly for fraudsters to open new card accounts quickly.
- Intermediary Account Fraud is on the Rise | Fraudsters are monetizing consumer’s personally identifiable information to open new accounts. These types of fraud schemes tripled in 2017 alone.
- Fraud Resolution Time is Rising Drastically | Fraud resolution time grew to 100 million hours in 2017, thanks to the rise in transaction in application fraud. Fraud victims spent more than double the time resolving fraud in the past two years.
- Banking Relationships are at Risk | Fraud victims spending an average of 17 hours sorting through the issue, which is nearly three times longer than those with credit card fraud problems. This can lead to strained relationship with their banks.
The report also provides some suggestions as to how financial institutions can strategically tackle the rise of card fraud. Two key recommendations are:
“Being able to identify compromised cards as soon as possible is critical to preventing fraud from starting or escalating. This includes the use of common point-of-purchase analysis in which cards with known fraud become canaries in the coal mine for potential cases of account data compromise.”
“Use machine learning. ...A continued reliance on traditional identity verification to prevent fraud during the digital application process has exposed issuers to the risk of rampant new account fraud. FIs and issuers must use new tools to catch fraudsters, who are not only armed with all the data they need but are also now using that data and the knowledge that few additional controls are present to increase their effectiveness.”
For more details, read the full report here.