3 October 2014

Card not present fraud is growing, two-thirds of APAC credit card issuers vulnerable

As e-commerce grows across Asia Pacific, so does the risk of online fraud. In a survey conducted at a fraud forum hosted by FICO, a predictive analytics and decision management software company, senior heads of fraud from across the region said that card not present* (CNP) fraud is the fastest-rising area. Near all (94%) of attendees reported a rise in CNP fraud.

Research firm eMarketer estimates that B2C e-commerce sales in APAC this year will reach US$525.2 billion, versus US$482.6 billion in North America.

“Regional consumers have become more accepting of non-traditional banking platforms, substituting cash for mobile and online transactions,” said Dan McConaghy, President for FICO in Asia Pacific, who hosted the APAC Fraud Forum in Singapore. “As this shift occurs, we see criminals using social engineering, application fraud, data breaches and more to obtain card details." 

Source: FICO.

FICO provides predictive analytics which uses statistical models to analyse payment data as it happens, so it can detect fraud quickly. Fifteen thousand calculations are completed in milliseconds once a credit or debit card is swiped to detect if fraud has occurred. This solution is being used by some of the largest banks in the region.

“For FICO’s technology, it doesn’t matter whether a transaction occurs online or in a store,” McConaghy said. “That’s the beauty of predictive analytics — it can spot oddities in payment patterns across channels, across cardholders and across networks.”

More than a third of the organisations represented at the Fraud Forum have already started using predictive analytics to combat fraud. That number is on the rise as banks seek to avoid losing money to fraudulent schemes and avoid the potentially greater loss of departing customers.

Recent studies have shown that the poor handling of fraud is a key reason for losing a customer’s trust. A 2013 study by MasterCard found that 40-45% of APAC consumers will change card providers after experiencing fraud.

“Banks understand that consumers have so many choices these days that a badly handled fraud case can cause a customer to stop using its services entirely and move to another bank,” said McConaghy. “You don’t get a second chance these days. Reputations are built on the ability to provide trusted and convenient services while protecting a cardholder’s funds and data.”

*'Card not present' fraud is fraud that occurs when the physical card is not used for a commercial transaction. E-commerce payments typically do not require the physical card, just the numbers on the card.