It is always a little dangerous to compare the U.S. payment market to others around the world and how the U.S. might react to a specific event or incursion. But, if there is an opportunity to get a little advance warning on a potential fraud threat, it bears a second look. A post from the Federal Reserve Bank of Atlanta includes some intriguing data trends from the U.K. regarding the growth of lost and stolen card fraud which was supposed to be largely averted by their chip-and-PIN approach to EMV card issuance. From Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed:
Although I’m still gathering data, one particular data point from the United Kingdom—lost and stolen fraud—already has me intrigued. In 2016, losses from this type of fraud stood at more than £96 million (about $130 million), up from more than £44 million (about $60 million) in 2010, a 117 percent increase. In 2010, lost and stolen fraud accounted for 12 percent of overall card fraud in that country. By the end of 2016, it had become 16 percent of card fraud. It is now the second leading type of fraud in the United Kingdom, though it still falls far behind CNP fraud, which accounts for 70 percent.
Remember that in the United Kingdom, PIN usage was adopted to mitigate lost and stolen card fraud at the same time that EMV chip cards were implemented. Yet lost and stolen card fraud is up significantly. According to Financial Fraud Action UK, fraudsters are getting their hands on the PINs—a static data element—through distraction tactics and scams. Other factors, such as the proliferation of contactless transactions and those that have no cardholder verification method, could also be drivers of this fraud, as could an increase of reports of lost or stolen fraud that is actually first-party, or “friendly,” fraud. EMV has proven to be an effective tool to authenticate cards, but authenticating an individual using a card, even in a card-present environment, remains a challenge.
Overview by Sarah Grotta, Director, Debit and Alternative Products at Mercator Advisory Group
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