Europe is just as eager to have the U.S. adopt the EMV (chip card) standard beginning this October as many here are. That’s because a high percentage of fraud losses in European countries stem from so-called "cross-border" fraud, where criminals use data on cards from one country to commit fraudulent transactions in another country.
Card fraud losses across 19 countries in Europe rose an average of 6% in 2014, according to a new report from analytic software company FICO based on data from Euromonitor International. But the modest overall rise masks large shifts in cross-border fraud and the continued fight against card-not-present (CNP) fraud.
United Kingdom card fraud losses rose by £29 million in 2014, a 6% rise on the previous year. Most of this increase was due to cross-border fraud, with domestic losses remaining flat.
In the United Kingdom, FICO previously reported a 25% increase in cross-border fraud on debit cards in 2014, compared to 2013. Forty seven percent of the fraudulent transactions were taking place in the United States—a pattern that seems related to the delay in U.S. adoption of EMV technology. The first wave of the EMV liability shift takes place in October 2015 in the United States.
"Banks in the United Kingdom and most of Europe adopted EMV technology years ago, so it may appear that they have little to worry about from mag-stripe fraud," says Martin Warwick, FICO's fraud chief for Europe. "However, the trends suggest that any European plastic card can be targeted, as criminals try to 'fill their boots' before the United States finally shuts the door on skimming fraud."
CNP fraud fight rages on
As reported in the FICO European Fraud Map for the last three years, the leading type of fraudulent card transaction is so-called card-not-present (CNP) fraud. The percentage of fraud losses from CNP fraud averaged 41% for Western European countries, and 23% for Eastern European countries.
In the United Kingdom, ecommerce spending more than doubled between 2008 and 2014, but CNP fraud losses have grown just 1% in that time. However, it has become a greater share of U.K. card losses, rising from 54% of card losses in 2008 to 70% in 2014.
"We are winning the war on CNP fraud, but we still have a long way to go to get CNP fraud fully under control," Warwick says. "Authentication of customers and their devices will play an ever-increasing role. This is why FICO has been focused on advances in analytics that assess consumer behavior, and profile not just cardholders but also devices and merchants."
France had the highest card fraud losses relative to card sales, followed by Greece and the United Kingdom, which is the same ranking as last year. Russia saw the fastest growth in card fraud losses—24%—but card sales in the same period grew 36%.
"Any market that is growing will attract criminals’ attention and that's exactly what is happening in Russia," Warwick says. "EMV has a long way to go to reach maturity in Russia. However, overall Russia has low fraud relative to sales. The key aim for banks will be to ensure that when growth in sales slows they are also in a position to slow the growth in fraud losses."