2017 ‘could be record year for card fraud losses’

Financial institutions should be braced for a tough fight against fraudsters this year, as they have been warned 2017 is set to be a record year for card fraud losses.

This is the claim made recently by CUNA Mutual, which noted there are several factors that are coming together to make the current time a particularly turbulent one in the fight against fraud.

For instance, it highlighted card skimming at ATMs or POS machines as an attack method that continues to be troublesome. Figures from FICO show that in 2016, such attacks were up by 70 percent compared with 2015, on top of a huge 546 percent year-over-year increase from 2014 to 2015.

CUNA Mutual also highlighted the threat of data breaches and procedural problems with card verification values (CVV2/CVC2) as issues that will help drive up losses for card-not-present transactions.

Robert Jarosinski, senior consultant for risk and compliance solutions at the organization, stated at CUNA America’s recent Credit Union Conference that despite the introduction of a range of new anti-fraud technology, criminals still have the upper hand.

“After signs of progress in 2016, the situation is getting worse again,” Mr Jarosinski said. “Several factors, including slower-than-expected merchant conversion to EMV and delays in shifting fraud liability to retailers are compounding the situation.”

He also highlighted several emerging types of fraud that are becoming more common, such as ‘failback’ transactions, which occur when a chip transaction cannot be completed at a normally chip-capable terminal due to technical issues. This means purchases proceed as magnetic stripe transactions, with any fraud liability falling on the issuer.

The fact that a requirement for gas stations in the US to adopt EMV-enabled POS machines has been pushed back to 2020 from the original deadline of 2017 will not help matters, CUNA Mutual stated.

However, the organization stressed that moving to EMV technology is still the best way for credit unions and merchants to fight fraud. It highlighted figures from Visa that show counterfeit fraud is down by 52 percent for merchants that have adopted EMV.

Written by Jack Dougal