The Fed’s fraud study reveals the expected and unexpected

The high-level trends in payment fraud are easy enough for industry professionals to surmise. Card fraud- both credit and debit- is on the rise, particularly in the fast-growing e-commerce channel. Nonetheless, the Federal Reserve’s newly issued fraud study is packed with valuable information. Its data-driven analysis confirms and quantifies some commonly held beliefs, and uncovers a few surprises in the process.

The report takes pains to note that while the rate of fraud is increasing, it remains exceedingly small. Across all payment types, only 46 cents of every $10,000 in payments volume is fraudulent. That translates to a minuscule .0046% in 2015, up from .0038% in 2012. The Fed incorporates further 2016 data for card transactions only. It shows that while in-person card fraud is declining (presumably thanks to EMV chip adoption), growth in remote card fraud continues unabated.

In terms of sheer dollar value, by 2016, remote card fraud ($4.6 billion) had surpassed in-person card fraud ($2.9 billion) despite representing a much smaller share of purchase volume. While ecommerce-driven remote card payments continue to grow at double-digit rates, fraud on those transactions is growing three times as quickly- and is now twice as common as in-person fraud on a percentage basis. Ponder that complexity during your Cyber Monday shopping frenzy.


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