Fraud losses incurred by banks and merchants on all credit, debit and prepaid general-purpose and private-label payment cards issued worldwide reached $21.84 billion last year when global card volume totaled $31.31 trillion, according to The Nilson Report.
In a press release, The Nilson Report said this means that, for every $100 in volume, 6.97 cents was fraudulent, up from 6.21 cents per $100 in 2014. Fraud, which grew by 20.6 percent, outpaced volume, which grew by 7.3 percent.
The U.S. accounted for 38.7 percent, or $8.45 billion, of gross card fraud losses worldwide, while generating only 22.9 percent of total global purchase and cash volume. U.S. fraud reached 11.76¢ per $100 last year. Fraud losses occur from counterfeit cards at the point of sale and ATMs, card-not-present transactions (made online or via mail, telephone, a social network or mobile app), fraudulent applications, lost and stolen cards and other smaller categories.
Losses to card issuers reached $15.72 billion, or 72 percent, of gross fraud losses worldwide. Merchants and acquirers lost the remaining $6.12 billion, or 28 percent, of the total. Issuers absorbed the majority of fraud losses last year. Issuer losses occur mainly from counterfeit credit and debit cards used at the point of sale and ATMs.
“The industry’s best defense against counterfeit fraud are EMV cards and the terminals needed to read their chips,” said David Robertson, publisher of The Nilson Report, in the press release. “EMV has been steadily penetrating dozens of countries, but in the U.S., where issuers poured EMV cards into the market, merchants lagged in deploying terminals.”
By year-end 2015, EMV-compliant cards handled nearly 36 percent of Visa, Mastercard, UnionPay, Discover/Diners, JCB and American Express card transactions worldwide. In the U.S., compliant transactions accounted for less than 2 percent of the total. By 2020, card fraud worldwide is expected to total $31.67 billion. Even though fraud has worsened every year this decade, it is still lower than the peak years of the 1970s when measured as basis points of total volume.