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Fed Releases 2013 Payments Study to Mixed Reviews

By ThreatMetrix
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First Time That Federal Reserve Study Addresses Fraud Related to Payments

According to the study, in 2012, 13.7 million fraudulent transactions involved credit cards, totaling $2.3 billion; 14.9 million involved debit or prepaid cards, totaling $1.5 billion; and 1.3 million, totaling $300 million, were fraudulent ATM withdrawals.

In her piece on (link to article), Tracy Kitten cites industry experts as saying “the new fraud data in the study [though] based on a 2012 survey of more than 1,300 U.S. banking institutions, payments processors and independent card issuers, will prove valuable to banks because it helps to highlight emerging fraud trends [and because questions about third-party fraud were added.]”

CNP three times more susceptible to fraud

The value of card-present fraud totaled $2.4 billion compared to card-not-present fraud, which totaled $1.6 billion. However, while the value of fraudulent CNP transactions was lower, the number of the fraudulent CNP transactions was three times greater than those reported for card-present fraud. And the CNP fraud rate for credit cards was the highest for all types of unauthorized third-party card transactions.

Third party card transactions

Jim McKee, a senior vice president of the Federal Reserve Bank of Atlanta, who was a key contributor to the study, pointed out that institutions were only asked to provide information about unauthorized third-party transactions they processed, not fraud they may have suspected or believed could be related to a retail breach. In his view the “Payments Study provides a helpful groundwork regarding ongoing payment trends.”

Reviews mixed

Tom Wills, a payments fraud expert, said the level of detail about third-party fraud is definitely of value to bankers. “It will help them determine what kind of resources to allocate for security and fraud programs. Different types of fraud indicate different types of countermeasures. For example, countermeasures for account-takeover fraud are different from those for online card fraud. Granular, quality data about fraud on a public level has historically been hard to come by, so I expect that bankers will welcome this additional insight.”

But financial fraud expert Shirley Inscoe, an Aite analyst, said she hopes future reports would include more detail about fraud losses. “This is great data; but it’s unfortunate the Fed did not also gather the same information concerning fraud losses. That would be a subset of the numbers reported and would also help quantify how good a job [financial institutions] are doing, overall, with their fraud-prevention efforts.”

By ThreatMetrix Posted