Credit card fraud in online transactions could cost businesses as much as $60 billion in 2005, according to research firm Financial Insights, despite the efforts of Visa and MasterCard in offering dedicated solutions to reduce online card fraud.
Net Credit/Debit Card Fraud In The US After Gross Charge-Offs
US Consumers' Concerns Over Online & Offline Card Fraud
| Credit Card Security Concern |
Percentage |
|
| Major/Moderate |
76% |
|
| Minor/No Concern |
24% |
|
| Online Credit Card Security Concern |
Percentage |
|
| Major/Moderate |
69% |
|
| Minor/No Concern |
30% |
Source: Ipsos-Insights, January 2004
Losses To Online Fraud At North American Retailers, 2000-2003
| Year |
Losses (%) |
|
| 2000 |
3.6 |
|
| 2001 |
3.2 |
|
| 2002 |
2.9 |
|
| 2003 |
1.7 |
Source: CyberSource/Mindwave Research, November 2003
UK Consumers Who Do Not Take Precautions Against Credit Card Fraud
| Never shred or burn bank or credit card statements |
37% |
|
| Never shred or burn receipts |
35% |
|
| Let others use their card for 'remote' purchases |
19% |
|
| Check bank/credit card statements only sometimes, rarely or never |
|
|
| Are unconcerned about letting the card out of their sight when shopping |
17% |
Source: APACS Card Fraud 2003 survey
Total Fraud On UK-Issued Credit Cards
| Type |
Losses to June 2001 (GBP) |
Losses to June 2002 (GBP) |
Losses to June 2003 (GBP) |
|
| Counterfeit |
129.8 mn |
161.1 mn |
128.8 mn |
|
| Card-not-present |
82.2 mn |
108.0 mn |
109.6 mn |
|
| Lost/stolen |
107.8 mn |
114.4 mn |
107.2 mn |
|
| Mail non-receipt |
20.5 mn |
32.5 mn |
41.0 mn |
|
| Identity theft |
16.0 mn |
15.4 mn |
25.0 mn |
Source: APACS Card Fraud 2003 survey
Global Bank Card Fraud (Losses Per USD 100 Volume)
| Year |
Losses (billions) |
|
| 1998 |
$2.0 |
|
| 1999 |
$2.3 |
|
| 2000 |
$2.7 |
|
| 2001 |
$3.3 |
|
| 2002 |
$3.8 |
Source: The Nilson Report, June 2003
How To Assuage Users' Concerns About Online Credit Card Use
| Items to reduce concerns |
Percentage |
|
| Nothing |
23.1% |
|
| Privacy or security guarantee |
19.5% |
|
| Better technology |
6.0% |
|
| New laws/regulations |
3.7% |
| Third-party verification |
2.6% |
| Consumer resources/education |
1.9% |
| Government enforcement |
1.6% |
Source: UCLA Internet Report 2003, January 2003
UK Cardholders' Attitudes To Chip And PIN Payments
| Category |
Size % |
Attitude |
|
| PIN Fearful |
28% (11.1mn) |
Not comfortable about using PINs; concerned about new scheme |
|
| Skeptics |
13% (5.3mn) |
Concerned about fraud; don't think new system will work |
|
| Happy coasters |
27% (10.7mn) |
Relaxed about fraud; happy to adopt new scheme |
|
| Convenience seekers |
14% (5.7mn) |
Early adopters; convenience is driving concern |
|
| Information seekers |
19% (7.8mn) |
Very concerned about fraud; want to know exactly how system works |
Source: UK Chip and PIN Programme, January 2003
Precautions US Adults Take To Prevent Identity Theft
| Method |
Percentage |
|
| Review bank/credit card statements for fraud |
88% |
|
| Shred/destroy credit card receipts/other financial papers |
77% |
|
| Check credit reports |
64% |
|
| Never give out social security number |
51% |
Source: FindLaw, March 2003
US Credit Card Fraud Statistics, 2003 - 2007
| Year |
Total Fraud
(USD mn) |
Online Fraud Rates |
Amount of
Online Fraud
(USD mn) |
Offline Fraud Rates |
|
| 2003 |
2,373.2 |
2.5% |
1,227.88 |
n/a |
|
| 2004 |
2,664.9 |
2.4% |
1,456.92 |
n/a |
|
| 2005 |
2,745.4 |
2.2% |
1,611.39 |
n/a |
|
| 2006 |
3,028.8 |
2.0% |
1,729.00 |
n/a |
|
| 2007 |
3,212.7 |
2.0% |
1,988.35 |
n/a |
Source: Celent Communications, via Lafferty Publications
How Online Fraud Is Committed In The US
| Method |
Percentage |
|
| Lost or stolen card |
48% |
|
| Identity theft |
15% |
|
| Skimming (or cloning) |
14% |
|
| Counterfeit card |
12% |
|
| Mail intercept fraud |
6% |
|
| Other |
5% |
Source: Celent Communications, January 2003
Percentage of Financial Losses To Online Fraud In The US, 2002
| Value (USD) |
Percent |
|
| $0 |
21 |
|
| $1 - 25 |
11 |
|
| $26 - 50 |
10 |
|
| $51 - 75 |
6 |
|
| $76 - 100 |
5 |
|
| $101 - 250 |
14 |
|
| $251 - 500 |
11 |
|
| $501 - 1,000 |
10 |
|
| $1,001 - 5000 |
10 |
|
| $5000 |
2 |
Source: US Federal Trade Commission, January 2003
Estimated US Online Credit Card Fraud, 2003 - 2007
| Year |
USD billion |
|
| 2003 |
2.3 |
|
| 2004 |
2.6 |
|
| 2005 |
2.7 |
|
| 2006 |
3.0 |
|
| 2007 |
3.2 |
Source: Celent Communications, January 2003
Impact Of Card Fraud On US E-Tailers' Revenues
Fraud As % Of
Annual Revenues |
Small Retailers |
Large Retailers |
|
| < 0.5% |
72% |
58% |
|
| > 1.0% |
17% |
20% |
|
| % of Revenue Spent Fighting Fraud |
|
| < 1% |
58% |
59% |
|
| < 3% |
8% |
7% |
|
| Merchants' Favored Anti-Fraud Tools |
|
| Address verification systems |
70% |
|
| Customer follow-up |
63% |
|
| Real-time authorizations |
61% |
Source: Merchant Fraud Squad, June 2002
Online Card Fraud As A Concern For US Firms
| Type of Concern |
2000 (%) |
2001 (%) |
|
| Loss of Revenue |
37 |
57 |
|
| Chargebacks |
43 |
45 |
|
| Financial reconciliation inefficiencies |
n/a |
34 |
|
| Bank fees |
34 |
29 |
Source: eMarketer, via CyberSource/Mindwave, November 2001
Estimated Costs of Not Using Anti-Fraud Software (in billions)
| Year |
Without Investment (USD bn) |
With Investment (USD bn) |
|
| 2002 |
14 |
12 |
|
| 2003 |
22 |
20 |
|
| 2004 |
39 |
35 |
|
| 2005 |
60 |
38 |
Source: Meridien Research
Net Credit/Debit Card Fraud In The US After Gross Charge-Offs
| Year |
All Cards (in millions) |
Bank Cards (in millions) |
|
| 2004 |
1,652.48 |
1,164.96 |
|
| 2005 |
1,817.68 |
1,294.09 |
|
| 2006 |
1,991.96 |
1,429.68 |
|
| 2007 |
2,183.70 |
1,580.86 |
|
| 2008 |
2,392.40 |
1,745.45 |
|
| 2009 |
2,623.31 |
1,927.38 |
|
| 2010 |
2,877.21 |
2,127.87 |
Source: The Nilson Report
