Europe Pushing back Fraud
European Central Bank’s (ECB) latest study on payment card fraud in the Single Euro Payments Area (SEPA) reports the general decrease in fraud in the 32 European countries.
In 2011, the total fraud with cards issued within SEPA amounted to €1.16 billion – a 5.8% decrease since 2010 in spite of growing card usage, which reached €3.3 trillion in that year. This corresponds to 0.036% in fraud share – a 10% decrease since the previous year.
Proof that Europe is leading the way in leveraging fraud prevention technology is how counterfeit card fraud has been moving outside these European countries towards other locations where security standards are lagging. Interestingly, even this kind of fraud has decreased which is certainly not unrelated to investments in fraud prevention technology. Still, transactions made outside SEPA account for just 2% of payments while amounting to 25% of all fraud!
The Portuguese Example
By looking at each of the 32 analyzed countries, both from an issuing and an acquiring perspective, we gain new insights on what is really working in combating payment fraud and what is simply a result of global circumstances.
According to the ECB «Most countries with mature card markets, defined as countries with high volumes and values of card transactions per inhabitant, experienced high fraud rates. Also, […] EMV has led to a shift in counterfeit fraud towards non-SEPA countries where EMV is less prevalent.»
It is interesting then to look at Portugal’s example – with one of the highest card usage rates, a lagging EMV migration level (a below-average 84.65% of supporting cards) and one of the lowest fraud incidence rates. For cards issued in SEPA, 1€ is lost to fraud for every €2.7K spent. For Portuguese cards, you have to spend €11K before losing €1 – a 4x improvement! Looking at the chart below, it’s startling to see Portugal present such low fraud share with such a high card usage rate.
Chart 1. Value of fraud as a % of total value of transactions for cards issued (blue) and acquired (brown) in a country. Source: ECB, all CPSs
Portugal’s unified and broadly available payment network – operated by SIBS – has turned the payment card the default method for not only purchasing items but also to handle a myriad of other services – including buying train tickets in the ATM. You would be excused to think this would make Portugal’s fraud incidence soar! Apparently not.
SIBS has been on the forefront of deploying the latest technology and innovations in terms of fraud prevention technology. Its wide knowledge of the payment market and the investment in FeedZai Fraud Prevention, a solution that is able to analyze, in real-time, all transactions that go through its network – either as an issuer or as an acquirer – is allowing it to outperform other payment processors in reducing chargebacks and stopping fraudulent transactions before they are authorized.
According to Vítor Bento, SIBS’ Chairman, technology employed by SIBS «goes from detecting fraud in each payment to determining its point of origin – the point of compromise – as well as identifying the modus operandi from criminal groups.»
Fraud Prevention Technology is catching up to the Fraudsters
This success is validated by the ECB’s emphasis on the importance of tracing and analyzing 100% of transactions. Detecting and stopping fraudulent transactions in real-time is the only way to prevent fraud happening in low-security environments, far from the EMV controlled oasis. As the ECB warns, «fraud is moving to nations with less developed anti-fraud technology».
You are only as safe as the weakest link in your payment chain – EMV in these countries, while reducing chances of card counterfeit, can’t protect PSPs from non-migrated terminals or from other places around the globe with lower security standards. Portugal’s example against the backdrop of the global SEPA fraud statistics shows that having an in-depth, full-spectrum payment analysis and fraud detection system looking at 100% of transactions, is the way forward.
To learn more on how FeedZai Fraud Prevention leverages real-time big data analysis and how it can help your organization stop fraud check out www.feedzai.com.
Read the full ECB report at http://www.ecb.int/pub/pdf/other/cardfraudreport201307en.pdf?1ad41a0ca45028bdfdaf9602b28eb482.
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