Meridien Research says online credit card fraud will total USD 9 billion by 2001, despite the success of Visa and MasterCard in reducing the total volume of bank card fraud to 6 cents in every 100 dollars.
Net Credit/Debit Card Fraud In The US After Gross Charge-Offs
Rejected Telephone/Web Payments Sent Via The ACH
| Telephone-Initiated Transactions |
|
| 2Q 2002 |
1.0% |
|
| 3Q 2002 |
1.3% |
|
| 4Q 2002 |
0.6% |
|
| 1Q 2003 |
0.2% |
| Web-Initiated Transactions |
|
| 2Q 2002 |
0.09% |
|
| 3Q 2002 |
0.10% |
|
| 4Q 2002 |
0.09% |
|
| 1Q 2003 |
0.09% |
Source: NACHA, June 2003
False-Positive Transactions As Proportion Of Fraud
| Category |
Percentage |
|
| Good Orders |
93.0% |
|
| Fraudulent/False-Positive Orders |
6.1% |
|
| Breakdown of Fraudulent/False-Positive Orders |
|
| Bad Orders Refused |
75.6% |
|
| False Positives |
18.6% |
|
| Bad Orders Approved |
5.8% |
Source: CardForum, 2002
Global Bank Card Fraud (Losses Per USD 100 Volume)
| Year |
Losses (billions) |
|
| 1998 |
$2.0 |
|
| 1999 |
$2.3 |
|
| 2000 |
$2.7 |
|
| 2001 |
$3.3 |
|
| 2002 |
$3.8 |
Source: The Nilson Report, June 2003
Factors Discouraging US Consumers From Using A Credit Card Online
| Factor |
Percentage |
|
| Concerned about security |
70% |
|
| Hassle to enter information |
9% |
|
| Don't have a credit card |
7% |
|
| Don't like interest charges |
6% |
|
| Purchase value too small |
4% |
| Exceeded personal limit |
4% |
Source: PaymentOne, April 2003
How To Assuage Users' Concerns About Online Credit Card Use
| Items to reduce concerns |
Percentage |
|
| Nothing |
23.1% |
|
| Privacy or security guarantee |
19.5% |
|
| Better technology |
6.0% |
|
| New laws/regulations |
3.7% |
| Third-party verification |
2.6% |
| Consumer resources/education |
1.9% |
| Government enforcement |
1.6% |
Source: UCLA Internet Report 2003, January 2003
Credit Card Use And Fraud Losses In Canada, 2000 - 2002
| Category |
2000 |
2001 |
2002 |
|
| Cards in issue (millions) |
40.10 |
44.10 |
49.40 |
|
| Cards reported lost or stolen |
805,580 |
813,624 |
796,371 |
|
| Cards used fraudulently |
112,070 |
116,139 |
136,598 |
|
Fraudulent accounts written off
(C$ millions) |
156.38 |
142.27 |
128.42 |
|
| Fraud loss rate |
0.12% |
0.10% |
0.08% |
Source: Cards International
UK Cardholders' Attitudes To Chip And PIN Payments
| Category |
Size % |
Attitude |
|
| PIN Fearful |
28% (11.1mn) |
Not comfortable about using PINs; concerned about new scheme |
|
| Skeptics |
13% (5.3mn) |
Concerned about fraud; don't think new system will work |
|
| Happy coasters |
27% (10.7mn) |
Relaxed about fraud; happy to adopt new scheme |
|
| Convenience seekers |
14% (5.7mn) |
Early adopters; convenience is driving concern |
|
| Information seekers |
19% (7.8mn) |
Very concerned about fraud; want to know exactly how system works |
Source: UK Chip and PIN Programme, January 2003
Precautions US Adults Take To Prevent Identity Theft
| Method |
Percentage |
|
| Review bank/credit card statements for fraud |
88% |
|
| Shred/destroy credit card receipts/other financial papers |
77% |
|
| Check credit reports |
64% |
|
| Never give out social security number |
51% |
Source: FindLaw, March 2003
Credit Card Fraud In Japan, 2000 - Q2, 2002
| Category |
2000 |
2001 |
Q2 2002 |
|
| Total Fraud (Y billion) |
30.87 |
27.57 |
13.62 |
|
| Fraud as a % of purchases |
0.142 |
n/a |
n/a |
|
| Counterfeiting/Forgery (Y billion) |
14.02 |
14.64 |
8.14 |
|
| Counterfeiting as % of total fraud |
45.4% |
53.1% |
59.8% |
Source: Japan Credit Card Industry Association, via Lafferty Publications
US Credit Card Fraud Statistics, 2000 - 2007
| Year |
Total Fraud
(USD mn) |
Online Fraud Rates |
Amount of
Online Fraud
(USD mn) |
Offline Fraud Rates |
|
| 2000 |
1,663.7 |
3.0% |
823.65 |
0.07% |
|
| 2001 |
1,750.5 |
2.5% |
852.63 |
0.07% |
|
| 2002 |
1,823.7 |
2.1% |
857.85 |
0.07% |
|
| 2003 |
2,373.2 |
2.5% |
1,227.88 |
n/a |
|
| 2004 |
2,664.9 |
2.4% |
1,456.92 |
n/a |
|
| 2005 |
2,745.4 |
2.2% |
1,611.39 |
n/a |
|
| 2006 |
3,028.8 |
2.0% |
1,729.00 |
n/a |
|
| 2007 |
3,212.7 |
2.0% |
1,988.35 |
n/a |
Source: Celent Communications, via Lafferty Publications
How Online Fraud Is Committed In The US
| Method |
Percentage |
|
| Lost or stolen card |
48% |
|
| Identity theft |
15% |
|
| Skimming (or cloning) |
14% |
|
| Counterfeit card |
12% |
|
| Mail intercept fraud |
6% |
|
| Other |
5% |
Source: Celent Communications, January 2003
Percentage of Financial Losses To Online Fraud In The US, 2002
| Value (USD) |
Percent |
|
| $0 |
21 |
|
| $1 - 25 |
11 |
|
| $26 - 50 |
10 |
|
| $51 - 75 |
6 |
|
| $76 - 100 |
5 |
|
| $101 - 250 |
14 |
|
| $251 - 500 |
11 |
|
| $501 - 1,000 |
10 |
|
| $1,001 - 5000 |
10 |
|
| $5000 |
2 |
Source: US Federal Trade Commission, January 2003
Estimated US Online Credit Card Fraud, 2002 - 2007
| Year |
USD billion |
|
| 2002 |
1.8 |
|
| 2003 |
2.3 |
|
| 2004 |
2.6 |
|
| 2005 |
2.7 |
|
| 2006 |
3.0 |
|
| 2007 |
3.2 |
Source: Celent Communications, January 2003
Online Fraud Protection Used By US E-Tailers, 2001 & 2002
| Protection Method |
2001 |
2002 |
|
| Verified by Visa |
14% |
17% |
|
| Address Verification Service (AVS) |
46% |
71% |
|
| Audits against site hacking |
33% |
65% |
|
| Encryption of stored credit card numbers |
48% |
59% |
|
| Paid risk management employee |
n/a |
49% |
Source: MindWave Research, November 2002
Online Security Tools Consumers Will Use In The Next Year
| Security Tool |
February
2002 |
September 2002 |
|
| Verified by Visa |
14% |
17% |
|
| MasterCard SPA |
12% |
9% |
|
| Disposable Card Numbers |
6% |
7% |
|
| Digital Certificates & Keys on PCs |
7% |
11% |
|
| Digital Certificates & Keys on Smart Card |
6% |
6% |
Source: GartnerG2
Why Card Issuers Use Payer Authentication Services
| Reason |
Percentage |
|
| Improve customer trust in online shopping |
19% |
|
| Reduce fraud |
64% |
|
| Acquire new cardholders |
9% |
|
| Improve customer loyalty to credit card brand |
5% |
|
| * 53 card issuers polled in September 2002 |
Source: Gartner Group, via American Banker
Impact Of Card Fraud On US E-Tailers' Revenues
Fraud As % Of
Annual Revenues |
Small Retailers |
Large Retailers |
|
| < 0.5% |
72% |
58% |
|
| > 1.0% |
17% |
20% |
|
| % of Revenue Spent Fighting Fraud |
|
| < 1% |
58% |
59% |
|
| < 3% |
8% |
7% |
|
| Merchants' Favored Anti-Fraud Tools |
|
| Address verification systems |
70% |
|
| Customer follow-up |
63% |
|
| Real-time authorizations |
61% |
Source: Merchant Fraud Squad, June 2002
UK Card Fraud Losses, 2000 - 2001 (Stg Millions)
| Category |
2000 |
2001 |
% Change |
|
| Counterfeit |
107.1 |
160.3 |
+50 |
|
| Card-not-present |
72.9 |
95.7 |
+31 |
|
| Lost/stolen card |
101.9 |
114.0 |
+12 |
|
| Intercepted in post |
17.7 |
26.7 |
+51 |
|
| Fraudulent application |
10.5 |
6.6 |
+37 |
|
| Other |
6.9 |
8.0 |
+15 |
|
| Totals |
317.0 |
411.4 |
+30 |
|
| Losses as % of turnover |
0.162 |
0.183 |
+13 |
Source: APACS, March 2002
Online Card Fraud As A Concern For US Firms
| Type of Concern |
2000 (%) |
2001 (%) |
|
| Loss of Revenue |
37 |
57 |
|
| Chargebacks |
43 |
45 |
|
| Financial reconciliation inefficiencies |
n/a |
34 |
|
| Bank fees |
34 |
29 |
Source: eMarketer, via CyberSource/Mindwave, November 2001
Payment Fraud In France, 1998 - 2000
| Category |
2000 |
1999 |
1998 |
|
| Fraud, forgery & counterfeiting |
317,044 |
258,306 |
246,991 |
|
| Falsification/use of stolen credit cards |
48,997 |
39,126 |
30,459 |
|
| Falsification/use of stolen checks |
114,346 |
108,580 |
119,470 |
|
| Check-related crimes, other than above |
16,619 |
15,476 |
16,813 |
Source: Lafferty Publications, November 2001
Card Fraud Rates In Basis Points
| Security Mechanism |
Card Type |
Basis Points |
|
| Mag-Stripe & Signature |
UK Credit Cards |
15 |
|
| Mag-Stripe & Online Authorization |
Visa US Credit Cards |
6 |
|
| Mag-Stripe with PIN |
Europay Maestro Cards |
3 |
|
| Smart Card with PIN |
Belgian Debit Cards |
1 |
Source: Lafferty Publications, September 2001
Cost of Internet fraud with and without technical investment
| Year |
With investment |
Without investment |
|
| 2000 |
$1.6 billion |
$1.6 billion |
|
| 2005 |
$5.7 billion |
$15.5 billion |
Source: Meridien Research
UK Card Fraud Losses, 1999 - 2000 (Stg Millions)
| Category |
1999 |
2000 |
% Change |
|
| Counterfeit |
50.3 |
102.8 |
+104 |
|
| Card-not-present |
29.3 |
56.8 |
+94 |
|
| Lost/stolen card |
79.7 |
98.9 |
+24 |
|
| Intercepted in post |
14.6 |
17.3 |
+19 |
|
| Fraudulent application |
11.4 |
10.2 |
-11 |
|
| Other |
3.0 |
6.5 |
+116 |
|
| Total |
188.4 |
292.6 |
+55 |
|
| As % of volume |
0.117 |
0.145 |
+24 |
Source: APACS
Credit Card Fraud - The Main Motive For Identity Theft
| Purpose |
Percentage |
|
| To obtain/take over a credit card account |
53% |
|
| To acquire telecommunications services |
27% |
|
| To obtain/take over a checking account |
17% |
|
| To obtain a loan |
11% |
Source: The Federal Trade Commission
Card Fraud Rates In Europe, 2000
| Card Type |
Volume |
Security Mechanism |
|
| Belgian Debit |
0.02% |
Smart Card & PIN |
|
| CB (France) |
0.04% |
Smart card & PIN |
|
| Maestro (Europay) |
0.06% |
Mag-stripe & PIN |
|
| UK Debit |
0.14% |
Mag-stripe & PIN |
|
| Visa EU Credit |
0.04% |
Mag-stripe & signature |
|
| Visa USA Credit |
0.06% |
Mag-stripe & signature |
|
| Europay Credit |
0.1% |
Mag-stripe & signature |
|
| Canada Credit |
0.15% |
Mag-stripe & signature |
|
| UK Credit |
0.16% |
Mag-stripe & signature |
|
| Cartes Bancaires Abroad |
0.47% |
Mag-stripe & signature |
Source: Lafferty Publications
Fraud Totals For 1999 on US Credit & Debit Cards
| Type of Fraud |
Fraud (millions) |
% of Total |
|
| Stolen |
$297.41 |
30.9% |
|
| Lost |
$179.02 |
18.6% |
|
| Skimming |
$111.65 |
11.6% |
|
| Mail Intercepted |
$93.36 |
9.7% |
|
| Identity Theft |
$83.74 |
8.7% |
|
| Altered Cards |
$51.97 |
5.4% |
|
| New Counterfeit |
$44.27 |
4.6% |
|
| False Applications |
$41.39 |
4.3% |
|
| Telefraud |
$38.49 |
4.0% |
|
| Other |
$21.17 |
2.2% |
|
| Total |
$962.49 |
100.0% |
Source: The Nilson Report
Attitudes of Americans Towards Cybercrime
| Category |
Total |
|
| Feel threatened/concerned over cybercrime |
67% |
|
| Want more protection for consumers |
62% |
|
| Less likely to do business online |
61% |
|
| No effect on eCommerce |
33% |
Source: IT Association of America
Fraud and Charge-offs by Visa & MasterCard in the US
| Year |
Fraud
% of Total Volume |
Charge-offs
(in billions) |
Charge-offs
% of Total Volume |
|
| 1999 |
0.06 |
$26.01 |
3.10 |
|
| 1998 |
0.07 |
$26.56 |
3.54 |
|
| 1997 |
0.09 |
$25.37 |
3.73 |
|
| 1996 |
0.11 |
$19.34 |
3.15 |
|
| 1995 |
0.13 |
$12.27 |
2.28 |
|
| 1994 |
0.14 |
$8.98 |
2.04 |
|
| 1993 |
0.15 |
$8.89 |
2.53 |
|
| 1992 |
0.18 |
$9.42 |
3.22 |
|
| 1991 |
0.17 |
$8.57 |
3.28 |
|
| 1990 |
0.13 |
$5.91 |
2.43 |
Source: The Nilson Report
Estimated Costs of Not Using Anti-Fraud Software (in billions)
| Year |
Without Investment (USD) |
With Investment (USD) |
|
| 1999 |
2 |
0 |
|
| 2000 |
5 |
3 |
|
| 2001 |
9 |
7 |
|
| 2002 |
14 |
12 |
|
| 2003 |
22 |
20 |
|
| 2004 |
39 |
35 |
|
| 2005 |
60 |
38 |
Source: Meridien Research
Net Credit/Debit Card Fraud In The US After Gross Charge-Offs
| Year |
All Cards (in millions) |
Bank Cards (in millions) |
|
| 1990 |
637.32 |
334.43 |
|
| 1991 |
869.73 |
460.74 |
|
| 1992 |
959.04 |
514.93 |
|
| 1993 |
932.26 |
524.61 |
|
| 1994 |
1,032.29 |
615.13 |
|
| 1995 |
1,189.67 |
732.69 |
|
| 1996 |
1,114.15 |
697.14 |
|
| 1997 |
985.90 |
631.49 |
|
| 1998 |
966.07 |
637.43 |
|
| 1999 |
956.22 |
643.35 |
|
| 2000 |
1,088.10 |
743.09 |
|
| 2001 |
1,221.87 |
843.15 |
|
| 2002 |
1,357.92 |
944.57 |
|
| 2003 |
1,499.23 |
1,049.54 |
|
| 2004 |
1,652.48 |
1,164.96 |
|
| 2005 |
1,817.68 |
1,294.09 |
|
| 2006 |
1,991.96 |
1,429.68 |
|
| 2007 |
2,183.70 |
1,580.86 |
|
| 2008 |
2,392.40 |
1,745.45 |
|
| 2009 |
2,623.31 |
1,927.38 |
|
| 2010 |
2,877.21 |
2,127.87 |
Source: The Nilson Report
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