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Card-not-present seen as fastest growing type of credit card fraud

While incidents rose, the average loss per compromised account fell 10

Card-not-present seen as fastest growing type of credit card fraud

The U.S. credit card fraud incident rate rose by 17% between January 2011 and September 2012. The fraud dollar-to-nonfraud dollar ratio remained stable during the same period, however, according to research by FICO  www.fico.com.

The card-not-present (CNP) fraud incident rate grew by 25% during the time period, far outpacing the counterfeit fraud incident rate, which grew by 14%. CNP fraud, which refers to purchases made without physically presenting a credit or debit card, such as online purchases, accounted for almost half (47%) of all credit card fraud.

While the rate of card fraud attempts rose, the average loss per compromised account fell 10% during the time period. FICO attributes this in part to innovations in its Falcon Fraud Manager, which it says protects 85% of U.S. cards.

“CNP transactions are very convenient for consumers, but CNP fraud can be especially complicated to combat,” says T.J. Horan, vice president of global fraud solutions at FICO. “We have been evaluating massive volumes of credit and debit card data for 20 years, looking for changes in consumer buying patterns, and we have invested in innovations that quickly identify CNP fraud, without delaying legitimate purchases and unnecessarily inconveniencing consumers.”

In contrast to credit card fraud, the debit card fraud incident rate was unchanged, and average fraud losses per account dropped by 3%. Most debit card fraud occurs at ATMs, grocery stores, and gas stations.

“While debit card fraud isn’t increasing in the United States, we’re not seeing the same level of decreases as have been seen in the United Kingdom over the past few years,” Horan says. “But, as EMV standards get implemented in the United States, we know that fraud will migrate as it has done in other regions of the world.”

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.

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