New study hangs price tag of nearly $11B on US card fraud

LexisNexis Risk Solutions has published a new study, "Issuers Confront Application Fraud and Account Takeover in a Post-EMV U.S.," that assigns a dollar value to direct losses from card fraud annually. It's a big number: $10.9 million.

And it's a number that the company has called a "moving target":

… the opportunities for fraud become ever more abundant as new services and products, including mobile wallets and digital channels make the payment card ecosystem ever more complex.

Credit cards represent 71 percent of fraud losses at $7.6 billion, or $9 per card — about three times more than fraud from debit cards. Debit accounts for 25 percent of fraud ($2.7 billion, or $2.80 per card). Prepaid cards, which are far outnumbered by debit and credit cards, contribute a relatively small $500 million in fraud losses, though the rate per card was relatively high at $4.70. 

Michael C. Smith, author of the study and director of fraud market planning at LexisNexis Risk Solutions, said that as EMV continues to roll out over the next 12 months in the U.S., issuers expect certain fraud types to increase as the window closes on easily counterfeited mag stripe cards.

The study concludes by looking at ways to fight back against fraudsters. According to Smith, companies can prepare for the fraud impact of EMV adoption by bolstering their application fraud and account takeover prevention capabilities, enhancing their identity verification platforms, and keeping open lines of communication with affiliates who may have shared fraud threats.

"Some organizations have made appropriate investments and have advanced programs that work, while others are looking for best practices," he said. "It only takes one major loss to feel the impact of a weak, simplistic, ineffective approach."

A free download of the study is available at LexisNexis Risk Solutions.

LexisNexis conducted an online survey in June 2015, polling 100 risk and fraud decision-makers and influencers at U.S. card issuers. The panel included issuers of all sizes in debit, credit, and prepaid card markets.