MADISON, Wis.—Crooks are attempting many more low-dollar fraudulent card transactions and they are executing them within the home and work areas of compromised cardholders.
Those are two of the newest trends in fraud, according to CUNA Mutual.
“Fraud is getting worse, and why is that?” asked Robert Jarosinski, CUNA Mutual Group risk management senior consultant, during the company’s payments webinar Wednesday. “We are seeing a lot of low-dollar transactions contributing to the rise—transactions that historically we do not see because crooks have typically wanted want big returns.”
Jarosinski said criminals are changing their patterns due to increased and improving fraud prevention and detection efforts, and they realize they have to put in more time to get their money. Criminals know, Jarosinski said, that the low-dollar transactions are far more likely to slip through fraud detection parameters.
“They know now that they have to fly lower beneath the radar,” said Jarosinski. “The low-dollar transactions are scored lower (by issuer risk parameters).”
What may be a bigger concern, said Jarosinski, is that crooks are getting even more clever and are using fraudulent card data within a compromised account’s general area.
“That way the transaction is also scored lower,” said Jarosinski, noting that the days of crooks stealing card data and using it in another city are waning. “These transactions look less suspicious.”
Jarosinski said CUNA Mutual Group recently completed a benchmarking study of about 100 CUs to better understand the performance of CUs’ card programs. The study also combined the fraud numbers with card spend data to normalize the fraud expenses, he said.
Jarosinski pointed out that fraud losses only tell half of the story. An increase in fraud expense may be offset by a reduction in income from spend. The reverse could be true as well. A reduction in fraud might seem great, but if income from spend was also reduced, the overall card program performance may be worse. To get at the true performance of a credit and debit card program, Jarosinksi said CUNA Mutual used the following formula: gross fraud dollar amount divided by card spend, multiplied by 100.
Comparing 2014 to 2015, the study shows that respondents saw the debit card fraud metric increase by 20%, or from 6.4 cents for every $100 in spend to 7.9 cents for every $100 in spend. Credit in the same period rose from 13 cents per $100 in spend to 14.7 cents per $100 in spend, or 11%.
Visa’s Andy Sun provided an update on the EMV migration in the U.S., sharing numbers similar to those previously reported by CUToday.info.
Sun noted that the U.S. now has more chip cards in the hands of consumers than any other country, and that EMV credit cards in the U.S. now outnumber the country’s mag-stripe total. He said there are 326 million Visa chip cards in play today.
As for merchants’ progress, 100,000 new chip card POS locations were added in June, bringing the U.S. total to 1.3 million merchant locations that accept EMV.
Sun pointed out the “strong trajectory” for the growth of chip-on-chip transactions—chip card and chip POS terminal.
“We saw 55 million in August of last year, 139 million in October, 231 million in December, 263 million in February, 345 million in April and 483 million in June,” said Sun.
With ATM EMV liability shift deadlines looming, October 2016 for MasterCard and Visa’s a year later, Sun recommended that CUs begin formulating strategies for conversion, if they have not started already.
“Focus first on ATMs in urban centers where there is high traffic,” said Sun, who added that crooks will find the mag-stripe ATMs and target them. “Don’t get left behind because the fraudsters will find you.”