By Krishnamoorthy , Product Marketing, Vembu Technologies
Worldwide losses resulting from fraud on credit, debit and prepaid cards reached $16.3 billion in 2014, according to the latest issue of The Nilson Report, up 19 percent from the year prior, and the U.S. produced 48.2 percent of global fraud losses while contributing only 21.4 percent to the overall card sales volume worldwide.
Total card sales volume reached $28.8 trillion last year, up 15% from 2013, but growth in fraud outpaced sales growth last year for credit, debit, and prepaid cards, according to the report.
The publication, which covers the credit card industry, found that fraud increased by 19 percent in 2014, while the overall volume of card sales only grew by 15 percent, the Credit Union Times reported. Card losses stemmed from counterfeit fraud, card not present fraud, fraudulent applications, lost and stolen fraud, card not received fraud and other less significant categories.
“Multiple factors contributed to that gap,” The Nilson Report Publisher David Robertson told the Credit Union Times. “Nothing mattered more than the lack of an EMV-compliant infrastructure.” One reason for the high U.S. fraud losses was the fact that magnetic stripe cards left retailers vulnerable to data breaches and other types of counterfeiting and fraud.
EMV technology provides the strongest protection against card fraud from counterfeit cards, Robertson confirmed, which made up 49 percent of the total card fraud losses worldwide in 2014.
Card issuers in the U.S. were hit particularly hard by counterfeiting losses last year. Gross fraud losses for all cards worldwide accounted for about 5.6 cents out of every $100 in total generated volume, according to the report, though card fraud losses in the U.S. far exceeded other areas of the world as its losses represented 12.6 cents out of every $100 in volume.
Data breaches and their aftermath, which contributed to millions of stolen card numbers and cardholder identification information being made widely available, were significant contributors to this particular type of card fraud, according to Robertson.
Fraud is becoming even harder to fight, with U.S. issuers reportedly losing $3.89 billion last year due to counterfeiting, which accounted for 23.9 percent of global fraud losses.
While the Oct. 1 EMV transition deadline for retailers to accept chip-and-PIN cards and associated shift in liability should alleviate the problem in physical stores, e-commerce firms should be prepared for more fraudulent activity to move online.
“I don’t think the online merchant is that prepared because human nature is to procrastinate,” Jason Tan, CEO and founder of fraud detection company Sift Science, told Retail Dive last month. “In other countries the year after the EMV mandate, online merchants saw two times the fraud.”
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