Card-Not-Present Fraud and ATM Attacks Hit Germany Hard, FICO Data Shows Data from the FICO Falcon Fraud Consortium shows 70 percent of card fraud was CNP, including online purchases
MUNICH, Aug. 30, 2013 /PRNewswire/ -- FICO (NYSE: FICO), a leading predictive analytics and decision management software company, today released new data showing the high rate of card-not-present (CNP) fraud on Germany's credit cards in 2012. Data from the FICO Falcon Fraud Consortium shows that 70 percent of the 2012 fraud on German-issued cards protected by FICO® Falcon® Fraud Manager was card-not-present (CNP) fraud, which includes e-commerce fraud. By contrast, counterfeit fraud represented just 20% of fraud cases.
"The challenge in Germany is to avoid CNP losses without impacting the customer experience and genuine card use," said Martin Warwick, FICO's fraud chief for Europe. "As CNP fraud is spread across multiple merchant categories, card issuers need to gain an in-depth understanding of individuals' specific e-commerce behavior. We are introducing new technology to FICO Falcon Fraud Manager that will enhance issuers' ability to spot behavior that falls outside a consumer's likely patterns. This enables issuers to repel fraud attempts without delaying legitimate purchases."
In contrast to CNP, more than half of cross-border, card-present fraud occurred in only a few merchant categories: ATMs, jewelry, electrical goods, grocery stores, supermarkets and smaller stores selling products such as wine, beer and spirits. "Criminals try to get cash or goods that they can easily turn into cash," Warwick explained. "Jewelry and electrical items are always near the top of their shopping lists. One easy way to thwart criminals is to combine analytics with tougher fraud rules around these categories, while relaxing the rules for good customers who are known to shop in these categories while they are abroad."
Cash is still the main driver for criminals, with ATM fraud accounting for a third of all cross-border card-present fraud, and an even higher percentage of domestic card-present fraud. "There can be legacy system issues with major banks in terms of ATM traffic flows," Warwick said. "For example, in the UK our investigations showed that at some banks the internal routing of ATM transactions was bypassing the bank's fraud detection system. Banks need to be confident in their defensive systems and adopt real-time detection to fight fraud effectively."
Generally, Germany experienced growth in card fraud last year, with total fraud losses exceeding those of 2006 by 140 percent, as illustrated in the FICO European Fraud Map.
FICO's new research is based on analysis of data from German card issuers using FICO® Falcon Fraud Manager, which guards one in three cards in Germany. Data on these cards is reported to the FICO® Falcon® Fraud Consortium and used to develop regional predictive models for FICO Falcon Fraud Manager. FICO Falcon Fraud Manager is the world's leading solution for card fraud management, and protects more than 2.5 billion active payment cards worldwide.
FICO (NYSE: FICO), formerly known as Fair Isaac, is a leading analytics software company, helping businesses in 80+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company's groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption — such as the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. FICO: Make every decision count™. Learn more at www.fico.com.
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