Although it will be a while until we get the 2017 figures, the 2016 figures were unequivocal. Card fraud is worse than ever, and in the UK it’s now worse than when chip and PIN was introduced.
Card fraud losses for 19 European countries hit approximately €1.8 billion, a new high. The UK saw the highest losses at £618 million, a 9 percent rise over 2015, topping the previous peak in card fraud, set in 2008 after the introduction of chip and PIN.
From European Card Fraud for 19 Countries Hit Record €1.8B in 2016 | FICO®
We’re fighting with the French for top spot in the European Champions League of Card Fraud. Who’s in front depends on how you measure things. Our fraud is high, largely because of our very high Card Not Present (CNP) fraud which is running at more than 12 basis points. So we have higher absolute losses but their overall loss is worse in proportion. Of course, it isn’t just a European problem.
Fraud, grew by 19%, and outpaced volume, which grew by 15%.
From Annual Global Card Fraud to More Than Double Reaching Over $35 Billion in Four Years
My general sense of the industry, without giving away anyone’s figures, is that not only is fraud growing faster than volume, but that merchants are getting annoyed because declines are growing even faster than fraud. (We need a sea change in tackling fraud and I think there are two parts to this: changing the security vs. convenience model at the front end and changing the transaction validations model at the back end.) Actually, merchants are annoyed not only because of declines.
As e-commerce merchants continue to invest in fraud prevention, those efforts cost, on average, 8 percent of their annual revenue, up from 7.6 percent last year, according to a new report… undertaken by Javelin Strategy & Research
From Fraud Prevention Costs Merchants 8% of Annual Revenue: Report – CardNotPresent.com
It’s actually nearer 10% for online-only merchants. This seems unsustainable to me, but remember I don’t understand the dynamics in the retail sector. If a lot of those online-only merchants are (just as an example) adult services then they may consider that losing a tenth of the revenue is perfectly acceptable. But surely for the typical online merchant it is impossible to continue with these costs. You do have to wonder just how long the cost of fraud can continue to rise, considering that the report also says the merchants are already devoting a fifth of their budgets to fraud prevention.
The card schemes are hoping to see their solution (3D Secure v2) taken up by European merchants in the spring and I’m sure that this will help. But what we really need to do is to roll out what we already know to be a successful roadmap: tokenisation, biometric authentication and a useable customer interface. When I buy a bus ticket on my phone, I pay using Apple Pay which delivers all of these: the W3C “payment request” initiative (already being implemented in the main web browsers) provides a means to extend this solution to the web. Let’s get on with this in the UK and leave the fraud trophy to the French!
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