The Nilson Report

Issue 1164 | Nov 2019

FEATURED COMPANIES

Companies featured in this issue include:

Card Fraud Worldwide 2010–2027 Cents per $100 of Total Volume

Percentage of Fraud Occurring Inside vs. Outside the U.S.

Card Fraud Projected Worldwide

Fraud by Type of Card 2018

Global General Purpose Cards Midyear 2019 vs. Midyear 2018

Largest Credit Card Issuers in Asia–Pacific

Largest Debit Card Issuers in Asia–Pacific

Top General Purpose/Visa/Mastercard Card Issuers in Asia–Pacific

The Largest Credit Card Issuers in Asia–Pacific

The 50 largest credit & debit card issuers in the Asia–Pacific region are ranked on page 10 based on purchase volume in 2018. The 5 largest credit card issuers are ranked here.

1. China Merchants, China
$555.35 billion purchase volume
2. China Construction, China
$443.42 billion purchase volume
3. Bank of Communications
$442.20 billion purchase volume
4. ICBC, China
$437.84 billion purchase volume
5. China Everbright, China
$351.66 billion purchase volume

Full access to the Largest Credit and Debit Card Issuers in Asia–Pacific is available when you subscribe to The Nilson Report.

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POSTED NOV 18, 2019 | PRINT

Card Fraud Losses Reach $27.85 Billion

Please note: Only subscribers can access the charts included with this article.

Global brand and domestic-market-only general purpose and private label credit, debit, and prepaid cards worldwide generated $40.582 trillion in purchases of goods and services and cash advances and withdrawals (including on-us ATM activity) in 2018, an increase of 17.7% over 2017. 

Card issuers, merchants, acquirers of card transactions from merchants, and acquirers of card transactions at ATMs experienced gross fraud losses of $27.85 billion, an increase of 16.2% from $23.97 billion in 2017. 

All card-based payment systems worldwide generated gross fraud losses that amounted to 6.86¢ for every $100 of total volume in 2018. This was a decline from 6.95¢ per $100 the previous year, and marked the second year in a row of declines when measured by cents per $100 in total volume.

Fraud losses in the United States of $9.47 billion compared to $8.98 billion in 2017. The U.S. accounted for 21.54% of total card volume worldwide in 2018 and 33.99% of gross card fraud losses worldwide. The prior year, the U.S. accounted for 23.43% of total volume and 37.47% of total fraud.

Not included in the $27.85 billion figure for losses to fraud are the expenses issuers, merchants, and acquirers bear related to operations, call centers, and chargeback management of fraudulent transactions, including investigation costs and external recovery expenses. Those costs grew by more than 15% in 2018 over 2017. In addition, the gross fraud figure of $27.85 billion applies only to cards. It does not include fraud losses tied to QR code-based payment systems or from bank account to bank account payment systems. 

The global general purpose brands—American Express, Diners Club/Discover, JCB, Mastercard, Visa, and UnionPay—combined for $33.731 trillion or 83.12% of total worldwide card volume (purchases and cash) in 2018. 

Gross fraud for the global brand cards amounted to $24.86 billion in 2018, an increase of 16.9% over $21.27 billion the previous year. The global brand cards combined to account for 89.26% of gross fraud losses worldwide for all cards in 2018, up from 88.75% the prior year. 

Our annual survey identified 88 general purpose domestic-market-only card brands worldwide. They were debit or credit or both. Domestic-market-only general purpose credit and debit cards combined to generate $4.001 trillion in total volume in 2018, an increase of 17.5% over 2017. Gross fraud losses amounted to $0.81 billion, up 14.2% over 2017. Domestic-market general purpose cards accounted for 2.89% of gross card fraud losses worldwide. 

Payment cards used only at select fueling stations, retail stores, airlines, medical practices, and other private label locations combined for $902.60 billion in total volume in 2018, an increase of 7.5% over $839.69 billion the prior year. Losses to fraud in 2018 of $0.60 billion increased 19.7% from 2017. This private label card fraud equaled 2.16% of gross card fraud losses worldwide. 

Credit and debit card transactions at ATMs outside the global general purpose card networks (Plus, Cirrus, etc.) amounted to $1.947 trillion in cash volume in 2018, a decrease of 2.0% versus 2017. Losses to fraud of $1.58 billion increased 6.5% versus 2017. This ATM activity accounted for 5.69% of global card fraud losses.

U.S. fraud losses amounted to 10.83¢ per $100 in 2018, a decline from 11.12¢ the previous year. The U.S. has seen a decline in basis points of fraud for three consecutive years even as the dollars lost has risen every year.

Fraud losses for all other countries in the world amounted to $18.39 billion in 2018—5.77¢ per $100 in total volume. This compared to $14.99 billion and 5.68¢ in 2017. 

In five years (2023), total payment card volume worldwide is projected to reach $57.080 trillion and gross card fraud is projected to reach $35.67 billion. However, fraud per every $100 in total volume will have declined to 6.25¢. U.S. fraud losses are projected to reach $12.02 billion by 2023.

In 10 years (2027), total payment card volume worldwide is projected to reach $71.593 trillion and gross card fraud losses are expected to reach $40.63 billion. Fraud is projected to drop to 5.68¢ per every $100 in total volume. 

Last year, losses to fraud incurred by card issuers worldwide reached $19.21 billion, up from $16.78 billion in 2017. Card issuers accounted for 68.97% of gross fraud losses worldwide. Merchants, merchant acquirers, and ATM acquirers accounted for the other $8.64 billion, which equaled 31.03% of total fraud losses.

Issuer losses occurred when criminals took over valid accounts, cards were lost or stolen or counterfeited, new accounts were opened with the intent to commit fraud, accounts were opened using a mix of valid and bogus information (synthetic fraud), cardholders or their family members made purchases and then disputed the charges (friendly fraud), and a few smaller categories.

Account takeover and synthetic fraud losses grew in 2018, helped by the abundance of personally identifiable information (PII) available for sale on the dark web. Both are made easier for criminals by new credit account applications that originate from mobile devices. Data breaches can provide 100% of the information needed for an account takeover. The theft of healthcare records, which are rich in PII, are a particular problem. Criminals purchase PII, gain access to a valid account, change key details, and have a new card mailed to a different address. Account takeovers can result in a quick loss to fraud. With synthetic fraud, criminals play a waiting game before they bust out and hit an issuer or issuers. The U.S. and Japan saw synthetic fraud rise in 2018.

Account takeover is measurable, while most synthetic fraud is not even counted as card fraud. Instead, issuers typically write it off as nonperforming loans. Friendly fraud, most of which is tied to digital goods, grew in 2018. This type of theft occurs in every country. However, there is no official fraud loss category for it.

Counterfeit cards used to make purchases in retail stores or at ATMs declined in 2018 but were still a problem, including in the U.S. where gas stations are not yet EMV-compliant. Stolen card data can be considered a counterfeit “card” when used in an online payment anywhere in the world.

While card-not-present (CNP) purchase volume amounts to less than 15% of all purchase volume worldwide, it accounts for 54% of all losses to fraud. CNP fraud losses grew in 2018 over 2017 everywhere in the world. However, progress is being made. While the dollars lost to CNP fraud increased last year, particularly in the U.S. where the volume of inbound online commerce is robustly growing, the approval rates increased for online transactions, which made the percentage of fraudulent transactions fall. Top merchants with layers of security generate the kind of data that enables the algorithms used in machine learning models to perform better. Merchants and issuers caught more fraud in 2018.

Merchants absorbed a higher percentage of all fraud losses in 2018. This has been a trend, and it will continue with the steady increase in CNP transactions, including cross-border online commerce. Merchants bear the full burden of fraud on CNP transactions except when 3D Secure protocol is involved. Those transactions were less than 2% of online payments in the U.S. in 2018. Merchants are hit hard by account takeover fraud in card-not-present transactions.

Fraud at ATMs came from skimming, PIN compromise, dispenser jackpotting, cash trapping, malware, skimming chip card data, network packet switching, and more. Fraud as a percentage of $100 in total volume increased in 2018 over 2017.

Organized professional criminal groups, large and small, grew in number and sophistication in 2018. So-called “social engineering” attacks increased, including man-in-the-middle software facilitated by Wi-Fi connectivity as well as “vishing”—criminals on the telephone posing as a bank representative. In both cases the aim is to steal PII. Criminals who stole data were usually a separate group from those that perpetrated fraud. Of particular impact in 2018 were automated botnets (software) that test issuers and merchants for vulnerabilities. The use of botnets grew by more than 15% in 2018 over 2017. These scripted challenges to security practices were used in “credential stuffing”—massive numbers of attempted logins of stolen usernames and passwords to find those consumers who use the same credentials for multiple accounts. Criminals supported those efforts with better attack strategies designed to foil defense strategies. One strategy used more widely in 2018 was to attack during the holiday shopping season, when issuers and sellers relax fraud fighting parameters because consumers might be spending outside normal behavior. In 2018, synthetic card fraud became a focus for a larger number of organized crime rings.

© Copyright 2019 The Nilson Report

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