The Federal Reserve Board of Minneapolis recently published a report that took a look at various payment topics from the vantage point of financial institutions (FIs). The Dodd Frank Update published some background regarding the report. There were some interesting findings regarding debit card fraud and the severity of its impact on FIs:
Over 90 [percent] of the respondents that track fraud attempts ranked signature-based debit cards among the top three payments having the highest number of fraud attempts,” the survey states. “Sixty-six percent of respondents state check fraud attempts are in the top three payment types having the highest number of fraud attempts. Although credit cards are fourth … this does not imply that credit cards experience less fraud attempts compared to other payments. Only 43 [percent] of respondents offer credit cards.
It bears mentioning that this survey was fielded in 2016. Migration to EMV chip cards for the debit card industry was still a work in progress then, and debit cards were targeted by criminal as “soft targets” so counterfeit fraud was higher at that time.
This report also provides some background on the types of fraud protection that FIs use and find effective. Interestingly enough, despite all the advancements in fraud detection with advanced machine learning capabilities, FIs in this survey felt that consumers identifying fraud on their own accounts was the most effective:
The report provides information about use and relative effectiveness of payments fraud detection and prevention methods as rated by respondents. Risk mitigation methods for each payment type are grouped into three categories: transaction screening and scoring, authentication methods and other reporting and risk management methods. The results indicate that consumer due diligence and the use of identification verification services are the most effective ways to prevent fraud.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
Read the quoted story here