Payment Solutions News | Fighting Back Against Payments Fraud

A NOTE FROM JEFF FELSER, SENIOR VICE PRESIDENT

Payment fraud trends evolve in the same manner that payment innovation evolves. Certainly, fraudsters look to identify and exploit areas of vulnerability in both established and emerging payments systems, but they will also gravitate quickly to new areas when previously vulnerable sectors of the payments ecosystem have been shored up. This was seen in 2015, when the widescale introduction of EMV® cards resulted in a reduction in point-of-sale (POS) payments fraud and an increase in card-not-present fraud.

Key Trends in Card Fraud

Interestingly, losses as a percentage of card volume have been rising every year since 2010. In 2016, worldwide gross losses from card fraud totaled nearly $23 billion. The U.S. actually accounted for 24% of global card volume in 2016, but almost 40% of card fraud losses. This vulnerability is primarily related to the sheer size of the economy, as well as the fact that other countries introduced EMV (chip cards) earlier.

But there is good news! Significant progress is being made in combatting card fraud. The widespread introduction of EMV in the U.S. starting in the second half of 2015 has led to a significant decrease in point-of-sale (POS) card fraud. According to Visa®, counterfeit card fraud dropped 76% between December 2015 and December 2017.[1]

However, card fraud hasn’t gone away; fraudsters are now shifting their attention from card-present to card-not-present transactions, as summarized in the following table.

Fraud Type 2016 Share   Change from 2015 (percentage points)
In Person 41.5% ⇩-12.3%
Remote 58.5% ⇧+12.3%
Fraudulent Use of Account Number 44.2% ⇩+5.1
Counterfeit Card 36.0% ⇧-7.7
Lost or Stolen Card 11.2% ⇧+0.4
Fraudulent Application 5.2% ⇧+2.0
Other 2.6% ⇧+0.2
Card Issued but Not Received 0.8% ⇧+0.1

Even though the volume of overall card fraud seems unusually high, the reality is that in commercial payments, according to the 2018 AFP® Payments Fraud and Control Survey, checks and wire transfers have the highest shares of fraud, while cards account for the third-largest share. Reported incidents of commercial card fraud have fallen in recent years (from a peak of 43% of organizations reporting card fraud in 2013 to just 30% in 2017). Again, this is due in large part to the introduction of EMV corporate cards, stronger control programs, deployment of best practices and the subsequent decline in POS card fraud. We discuss findings from the latest AFP Payments Fraud Survey in this issue’s infographic.

Check Fraud

Although check usage for B2B and B2C payments has been declining steadily in recent years, many businesses still make use of checks in their payment mix.  However, it is also the payment method most vulnerable to fraud, due to many organizations not taking advantage of all of the fraud protection services available.  According to the AFP Payments and Control Survey, 74% of organizations that fell victim to fraud attacks in 2017 experienced check fraud. As a result, many organizations are now considering using fraud control services such as Positive Pay, Payee Positive Pay and daily reconciliation, as well as implementing practical steps in their systems and operations to address specific vulnerabilities.

Emerging Payments Fraud

Organizations are embracing new payment methods (e.g., mobile payments, real-time payments, and same-day ACH) as they provide speed, convenience and greater transaction intelligence. We have covered many of these new payment types in recent issues of Payment Solutions News, including mobile payments (Summer 2017), real-time payments (Spring 2018), and same-day ACH (Fall 2016 and Spring 2018). PNC will continue to introduce new payment innovations in 2018, to address our clients’ need for solutions to increasingly complex commercial payment needs.

As our clients embrace a more diverse range of commercial payment solutions, we recognize that this may leave them vulnerable to emerging fraud types from increasingly sophisticated fraudsters, including incidences of account takeover, which tripled in 2017.[2]

PNC Solutions

Providing an array of commercial card fraud protections, including:

  • Fraud protection features embedded in commercial payment products
  • Standalone fraud protection solutions
  • Reporting and monitoring tools that enable clients to identify and address fraud threats

In the Product Spotlight section of this newsletter, we showcase some fraud protections for our commercial card clients that we are rolling out in 2018. These include:

  • Dynamic CVV2 codes
  • Two-way text and email fraud alerts
  • Account validation services

Thought Leadership

Publishing a regular series of content on fraud topics in our Ideas, Insight & Solutions content hub. The following topics have been covered recently:

Direct Support (through our dedicated account management teams)

Deploying an array of monitoring tools (such as Visa IntelliLink® Compliance Auditor and Compromised Account Management System) to enable clients to quickly identify and react to fraud incidents.

 

Solutions

Videos, webinars, white papers and economic reports that can help you maximize the value of your business.

www.pnc.com/ideas

Discover how PNC can deliver ideas, insights and solutions to help you achieve your objectives. Contact your PNC Treasury Management Officer or Account Manager, or visit

www.pnc.com/treasury

 

Economic Reports

The National Economic provides insight into national and regional trends.

Read now »

Important Legal Disclosures & Information

[1]  Visa Chip Card Update, March 2018

[2]  “Identity Fraud Hits All Time High With 16.7 Million U.S. Victims in 2017, According to New Javelin Strategy & Research Study,” Business Wire, February 6, 2018

This Payments Solution News was prepared for general information purposes and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, and does not purport to be comprehensive. Under no circumstances should any information contained in this newsletter be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. (“PNC”) will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission.

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EMV is a registered trademark in the U.S. and other countries, and is an unregistered trademark in other countries, owned by EMVCo.

RTP® is a registered trademark of The Clearing House Payments Company LLC.

Visa and Visa IntelliLink® are registered trademarks of Visa International Service Association and used under license.

Mastercard is a registered trademark of Mastercard International Incorporated.

Android, Android Pay, and the Android Logo are trademarks of Google Inc.

Apple Pay® is a registered trademark of Apple Inc.

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