Page 68 - Pay Magazine s2014

finance & strategy
EMV: The Ripple Effect of Fraud
Figure 2:
u.S. appliCaTion Fraud 2015 To e2020
Figure 3:
u.S. Cnp Fraud and reTail digiTal CommerCe growTh 2011 To e2020
(in uS$ millionS)
$2,500
$2,000
$1,500
$1,000
$500
0
SOURCE: Aite Group
n credit card n dda
$1,614 $1,368
$600
$2,096 $1,888
$694
e2020
$1,169 $996
$541
$648
$420
$466
2015 e2016 e2017
e2018 e2019
(in uS$ billionS)
cnp fraud
$7.2 $6.9 $6.5 $5.3 $4.0 $3.2 $2.8 $2.8 $2.6 $2.1
SOURCE: Aite Group
retail digital commerce
$770 $664 $562 $473 $404 $350 $304 $263 $227 $198
e2020 e2019 e2018 e2017 e2016 2015 2014 2013 2012 2011
66
ve of the FIs seeing more than 100 percent spikes year over year.
U.S. DDA application fraud losses will total $466 million in 2016 and will grow to $694 million by 2020. The o cial application fraud numbers that credit card issuers report to the payment networks amount to about 2 percent of total credit card fraud, but the problem is substantially bigger than that because rst-party fraud (i.e., identity fraud without a victim)
is often misclassi ed and written o as a credit loss. Credit card application fraud losses will in- crease from $1.2 billion in 2016 to $2.1 billion in 2020 (Figure 2).
CNP Fraud
Card-not-present transactions
are just that—transactions in which the payment card is not present. While the contact center comprises a portion of these transactions, digital transactions originating
from online and mobile channels represent the lion’s share of CNP volume. U.S. digital commerce is growing at a healthy clip, averaging 15 to 16 percent year-over-year growth for the past ve years.
A testament to U.S. issuers’ and merchants’ investments in fraud prevention, CNP fraud actually plateaued at US$2.8 billion from 2013 to 2014, meaning that the good guys were actually gaining ground. The happy state soon passed, however, and CNP fraud resumed its steady growth in 2015, rising 14 percent from 2014 to 2015.
While nearly all FIs interviewed
are seeing some degree of CNP fraud increase, the rate at which it’s rising varies considerably. Some FIs report modest increases, while others are seeing a sharp uptick. One FI reports its CNP fraud nearly doubling year over year. A few FIs are seeing attempts on the CVV2
increase. While some FIs limit this with rules and velocities, others do not because, according to their analysis, the CVV2 is “completely nonpredictive” of fraud.
With only 20 percent of credit
card transactions chip-on-chip,
it’s too soon to blame the rise
of CNP fraud on the EMV migration. The more likely culprit is the vast quantity of compromised data