The Nilson Report

THE CURRENT ISSUE: Issue 1142 | Nov 2018


Companies featured in this issue include:

Card Fraud Losses Reach $24.26 Billion

Top Card Issuers in Asia–Pacific

IPO on Nasdaq for Brazil’s Stone

NCR Buys Payment Processor

U.S. General Purpose Cards through 3Q 2018

Origami QR Code Payments

Crypto/Fiat Currency Visa Cards

Investments & Acquisitions–October 2018

SCSpro POS Terminal

Card Fraud Worldwide–Annual Increase/Decrease in Fraud vs. Total Volume

Investments & Acquisitions–October 2018

U.S. General Purpose Cards through 3rd Quarter 2018

Fraud by Type of Card 2017

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

Card Fraud Projected Worldwide

Largest Credit Card Issuers in Asia–Pacific

Largest Debit Card Issuers in Asia–Pacific

Top General Purpose/Visa/Mastercard Card Issuers in Asia–Pacific 2017

U.S. General Purpose Cards through 3rd Quarter 2018

Results for Visa, Mastercard, American Express, and Discover cards for the first nine months of 2018 are shown on page 7. Figures include credit and debit card spending and cash versus purchases.

1. Visa, Credit
$1,436.30 bil. purchase volume, +10.6%
2. Mastercard, Credit
$591.67 bil. purchase volume, +8.7%
3. American Express, Credit
$568.37 bil. purchase volume, +10.3%
4. Discover, Credit
$102.12 bil. purchase volume, +8.9%

Full access to the General Purpose Cards through 3rd Quarter results in the United States is available when you subscribe to The Nilson Report.



Total volume—purchases and cash—generated by all global brand and domes-tic-market-only general purpose and private label credit, debit, and prepaid cards worldwide reached $34.119 trillion in 2017 up 7.0% from 2016. That fig-ure includes “on us” and regional ATM withdrawals switched outside of the global networks. 

Gross fraud losses to card issuers, merchants, acquirers of card transactions from merchants, and acquirers of card transactions at automated teller ma-chines (ATMs) in 2017 were $24.26 billion, up 6.4% from $22.80 billion the prior year. The 2017 fraud figure does not include fraud-related costs that issuers, merchants, and acquirers incur for operations, call centers, and chargeback management. Also not included are fraud losses tied to the growing number of direct-to-bank-account payment systems used for ecommerce or from mobile phone-based QR code payment systems. 

Gross fraud losses for all card-based payment systems worldwide equaled 7.11¢ per every $100 of total volume last year, down from 7.15¢ per $100 in 2016. 

American Express, Diners Club/Discover, JCB, Mastercard, Visa, and Union-Pay—the global general purpose brands—accounted for $27.885 trillion or 81.7% of total worldwide card volume in 2017. 

Global brand card fraud reached $21.57 billion last year, up 6.9% from $20.18 billion in 2016. Fraud in 2017 was equal to 7.73¢ of every $100 in global brand volume, down from 7.75¢ in 2016, when global brand volume was $26.044 tril-lion. Global brand cards incurred 88.9% of total gross fraud losses worldwide for all types of cards in 2017. 

Domestic-market-only general purpose card brands worldwide can be debit or credit or both. There were 81 brands in 2017 including Star, Pulse, Nyce, Accel, Maestro, Interac, RuPay, BC Card, Elo, girocard, Dankort, Troy, Hipercard, ViaT, Banricompras, Redcompa, DinaCard, epal/eftpos, KB Kookmin, Cabal Card, Samsung Card, J-Debit, Mir, Shetab, Mada, Allatm, SmartPay, Tcard, KNet, eCash, Pago Bancomat, Clave, Infonet, ATH, Cartes Bancaires, Verve, and Bancontact/Mister Cash. 

Total volume on domestic-market-only credit and debit cards reached $3.407 trillion in 2017, up 9.6% over 2016. Fraud reached $705.5 million in 2017, an increase of 8.4% over 2016. 

Domestic-market general purpose card fraud accounted for 2.9% of gross card fraud losses worldwide. 

Private label cards usable only at fuel locations, retailers, airlines, medical prac-tices, and elsewhere generated $839.69 billion in total volume in 2017, up 7.3% from $782.79 billion in 2016. Fraud losses in 2017 were $503.7 million, up 3.5% from 2016, and accounted for 2.1% of gross card fraud losses worldwide. 

ATM transactions outside the global general purpose card networks generated $1.987 trillion in cash withdrawal volume in 2017, up 2.2% from 2016. Fraud losses were $1.49 billion, up 0.2%, and equal to 6.1% of global fraud losses.

By 2022, total volume is projected to reach $56.172 trillion, and card fraud worldwide is expected to total $34.66 billion, including $12.12 billion in the U.S. However, fraud as a percent of every $100 is predicted to decline to 6.17¢. 

By 2026, when total volume worldwide is projected to reach $75.052 trillion, card fraud losses worldwide are projected to reach $42.32 billion, including $13.93 billion in the U.S. Fraud is predicted to decline to 5.64¢ of every $100 in total volume. 

Last year, the United States accounted for $9.37 billion in fraud. This was 38.6% of gross card fraud losses worldwide. 

The U.S. generated 23.7% of the global total for purchase volume and cash volume. U.S. fraud was 11.60¢ per $100 last year, down from 11.81¢ the prior year. All other countries in the world combined accounted for $14.89 billion in fraud losses, equal to 5.72¢ per $100 in volume. This was an increase from 5.69¢ the prior year. 

Card issuers worldwide experienced $16.98 billion or 70% of gross fraud loss-es worldwide. The remaining $7.28 billion in fraud losses, which amounted to 30% of the total, were incurred by merchants, merchant acquirers, and ATM ac-quirers.

Issuer losses occurred from counterfeit cards, takeover by criminals of a valid account, lost/stolen cards, fraudulently opened new accounts, including synthet-ic fraud, where credit card accounts are opened using both valid and bogus in-formation, and other smaller categories. 

Friendly fraud, which involves cardholders disputing valid charges, particularly for digital goods, and which occurs in every country, gets dumped into various categories. Synthetic fraud losses are also difficult to measure. Issuers tend to categorize these as bad debt. 

Losses from counterfeit cards declined in the U.S. and worldwide last year as EMV cards and EMV-enabled POS terminals and ATMs continued to provide an effective defense. Markets that have not yet moved completely to EMV, includ-ing Thailand, Japan, and Taiwan, continued to see counterfeit card activity. 

Card-not-present (CNP) fraud continued to plague the industry, particularly in the U.S. and Europe, which combined to account for nearly 75% of CNP fraud. CNP fraud also increased in Asia–Pacific. More than 50% of all fraud losses worldwide are tied to CNP transactions. However, CNP volume accounts for less than 15% of total volume worldwide. 

Merchant losses to fraud have been increasing in recent years as a percentage of total fraud losses, and that continued in 2017. Large U.S. merchants are fighting fraud with layers of protection and are seeing positive results when measured by basis points of fraud to total sales. However, the dollars lost to fraud increased last year. 

Card fraud losses in 2017 were tied largely to professional criminals who are increasingly organized and typically more knowledgeable about the digital world than most banks or merchants. 

Evidence of organized criminal activity include fraud attempts at scale using high-velocity attacks, often leveraging malware on a valid device. Additional ev-idence was a spike in lower-value fraud, indicating criminals were aware of spending limits on certain transaction types. 

Organized gangs are constantly probing the defenses of issuers and acquirers to identify vulnerabilities, trying combinations of data elements to hide a test for a particular recently stolen data point. 

Law enforcement agents know where stolen card and personally identifiable information (PII) is bought and sold, yet the criminals continue to sell that infor-mation profitably, often encrypting the data as well as mixing old and new cre-dentials to defend their inventory. 

The good news is that the industry succeeded in lowering the average loss per stolen card, which helped keep fraud losses manageable. 

Over the next five years, 3-D Secure 2.0, tokenization, biometric authentication, and other means of digital identification will harness card-not-present fraud.

© Copyright 2018 The Nilson Report