Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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December 22, 2016
Why U.S. Card Fraud Is Now Present and Accounted For
Last year, I wrote a post called "Why Is the U.S. Card-Present Fraud Breakout Not Present?" in which I discussed the lack of publicly available information on the distribution of U.S. card fraud by type. I'm happy to report that more detailed data on card fraud in the United States is now present and accounted for in the Initial Data Release (IDR) of the 2016 Federal Reserve Payments Study.
As is common in other countries, card fraud can be categorized as follows across person-present and remote payment channels:
- Counterfeit card: Fraud is perpetrated using an altered or cloned card.
- Lost or stolen card: Fraud is undertaken using a lost or stolen card.
- Card issued but not received: A newly issued card in transit to a card holder is intercepted and used to commit fraud.
- Fraudulent application: A new card is issued based on a fake identity or on someone else's identity.
- Other: "Other" fraud includes account takeover and other types of fraud not covered above.
- Fraudulent use of account number: Fraud is perpetrated without using a physical card.
An extract from the fraud section of the IDR shows breakouts for card fraud by type across five countries.
As reflected in the numbers, the United States continues to be by roughly an order of magnitude a continuing and persistent target for card counterfeiters using stolen card data compared to other countries that have adopted much earlier counterfeiting controls using EMV (chip) cards. Use of chips makes in-person card fraud more difficult, because of built-in technology to thwart the creation of counterfeit chip cards. As adoption of chips for cards and terminals improves in the United States, fraud using stolen card data is likely to shift from person-present to remote channels as has already occurred in other developed countries. My colleague, Doug King, discusses these issues in detail in an interview conducted last year.
Look for other Take On Payments posts that highlight additional key findings from the 2016 payments study.
By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
- Expanding Cybersecurity
- The Year in Review
- Why U.S. Card Fraud Is Now Present and Accounted For
- Making Sense of Dollars, Part II
- Making Sense of Dollars, Part I
- Are Mobile Phone Payments Secure?
- "Good, Better, Best" in Understanding Merchant Payments
- The Downside of a Wide Paintbrush
- Of Piggy Banks and Bank Branches
- EMV Comments That Make Me Cringe
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- account takeovers
- ATM fraud
- bank supervision
- banks and banking
- card networks
- check fraud
- consumer fraud
- consumer protection
- cross-border wires
- data security
- debit cards
- emerging payments
- financial services
- identity theft
- law enforcement
- mobile banking
- mobile money transfer
- mobile network operator (MNO)
- mobile payments
- money laundering
- money services business (MSB)
- online banking fraud
- payments risk
- payments study
- payments systems
- phone fraud
- remotely created checks
- risk management
- Section 1073
- social networks
- third-party service provider
- trusted service manager
- Unfair and Deceptive Acts and Practices (UDAP)
- wire transfer fraud
- workplace fraud