CARPINTERIA, Calif.–Fraud losses incurred by banks and merchants on all credit, debit, and prepaid general purpose and private label payment cards issued worldwide reached $21.84 billion last year when global card volume (purchases of goods and services combined with cash advances and withdrawals) totaled $31.310 trillion, according to new data released by The Nilson Report.
That means that for every $100 in volume, 6.97¢ was fraudulent, up from 6.21¢ per $100 in 2014, the company noted. Fraud, which grew by 20.6%, outpaced volume, which grew by 7.3%, The Nilson Report added.
The U.S. accounted for 38.7%, or $8.45 billion, of gross card fraud losses worldwide, while generating only 22.9% of total global purchase and cash volume. U.S. fraud reached 11.76¢ per $100 last year, according to the company.
Included in the fraud figures are losses from counterfeit cards at the point of sale and automated teller machines, card-not-present transactions (made online or via mail, telephone, a social network, or mobile app), fraudulent applications, lost and stolen cards, and other smaller categories.
Losses to card issuers reached $15.72 billion or 72% of gross fraud losses worldwide. Merchants and acquirers lost the remaining $6.12 billion or 28% of the total. Issuers absorbed the majority of fraud losses last year. Issuer losses occur mainly from counterfeit credit and debit cards used at the point of sale and ATMs, The Nilson Report said.
“The industry’s best defense against counterfeit fraud are EMV cards and the terminals needed to read their chips,” said David Robertson, publisher of The Nilson Report. “EMV has been steadily penetrating dozens of countries, but in the U.S. where issuers poured EMV cards into the market, merchants lagged in deploying terminals.”
By year-end 2015, EMV-compliant cards handled nearly 36% of Visa, Mastercard, UnionPay, Discover/Diners, JCB, and American Express card transactions worldwide. In the U.S., compliant transactions accounted for less than 2% of the total, according to The Nilson Report.
“Fraud losses to merchants and their acquirers occurred overwhelmingly from CNP transactions, and the problem is aggressively worsening,” the company said. “Losses to CNP fraud exceeded $5.65 billion last year, with growth in nearly every country. In the U.S., CNP already accounts for more than 50% of total fraud losses.”
By 2020, card fraud worldwide is expected to total $31.67 billion. Even though fraud has worsened every year this decade, it is still lower than the peak years of the 1970s when measured as basis points of total volume.