Credit card fraud is a real threat for issuers, merchants and consumers. This significant problem has far-reaching repercussions and can have an impact on a company's willingness to accept credit cards and a consumer's trust in using them for purchases.
Card fraud on the rise
According to new research from The Nilson Report, card fraud losses are on the rise, and this trend isn't likely to reverse any time soon. The study found gross fraud losses added up to $11.27 billion last year - an increase of 14.6 percent when compared to 2011's numbers. While card issuers suffered 63 percent of the losses, merchants and acquirers losses amounted to 37 percent - a significant portion. The numbers could have an even more profound impact on smaller operations, which may not have the capabilities to handle such an event.
Gross fraud losses were up in regard to volume - while they amounted to 5.07 cents per $100 in 2011, this jumped to 5.22 cents per $100 in 2012. While debit cards with PIN numbers experienced the lowest level of fraud, global brand cards averaged much higher losses. According to The Nilson Report, the relatively high levels of improper card use seen can be traced back to the lack of EMV cards and payment terminals. In fact, the U.S.'s failure to adopt this system could be a factor that is contributing to it being the only region in which card fraud has continued to grow.
Will fraud deter card use?
Because EMV cards have not caught on in the U.S., fraud could continue to be a problem for cardholders, issuers and merchants who inadvertently accept unauthorized payments. This is especially true considering the nearly 15 percent year-over-year jump in losses seen from 2011 to 2012.
Consumers who may have experienced fraud in the past may be reluctant to use credit cards frequently, particularly if they went through a long ordeal to set things straight after their card was used without authorization or stolen. Similarly, smaller businesses that experienced significant losses due to fraudulent card use may be reluctant to continue accepting these payments as frequently and instead ask consumers to complete transactions with cash, which carries less risk. While this may be a smart move for some companies, those who prefer cash payments will need to have the most up-to-date money counters available to handle customer purchases.
August 21, 2013