Financial institutions (FIs) in the US continue to rate payment fraud losses as one of their most pressing issues, with a new study finding that the majority of banks are experiencing such problems.
A report by the Federal Reserve Bank of Minneapolis revealed that three-quarters of FIs (75 percent) describe payments fraud as a problem. What’s more, 96 percent of debit card issuers and 77 percent of credit card issuers reported losses in 2016.
However, the research did identify several key steps that banks can take that have proven effective in reducing this issue. It noted, for example, that encouraging customer diligence – such as reminding them to review transactions and statements online and report any suspicious activity – is highly useful. This reduces losses across all payments types, including cards, checks, and automated clearinghouse and wire transfers, and half of respondents rated this as very effective.
Guy Berg, vice-president of the Payments, Standards and Outreach Group at the Minneapolis Fed, stated: “This report provides great insights into what FIs are doing and find effective to mitigate payments fraud. FIs could use the information to benchmark their own fraud mitigation methods against those identified as effective in the survey.”
One other factor is the increased use of chip-enabled cards for authentication, which helps reduce counterfeit fraud at in-person POS transactions. More than 80 percent of FIs report that they now use this technology.
This can have a significant effect, as figures from Visa, reported by PYMNTS.com, illustrate. It noted that counterfeit fraud at chip-enabled merchants in the US fell by 66 percent between June 2015 and June 2017.
More than 462 million chip cards have now been issued to consumers in the US, with Visa reporting that as of September 2017, there were $59.4 billion in chip transactions, up from $4.8 billion in the same month of 2015.