Research Predicts POS Fraud Will Be Replaced By Card Not Present And New Account Fraud
By Christine Kern, contributing writer
8 million consumers predicted to experience card breach and identity fraud in same year by 2018.
According to Javelin Strategy & Research, as many as 8 million consumers could experience both a card breach and identity fraud in the same year by 2018. This is among the findings of a new study that predicts point-of-sale card fraud will decrease while card-not-present and new account fraud is on the rise.
The new 2015 Data Breach Fraud Impact Report explores the type of credentials that fraudsters will want to steal, the type of businesses that are most at risk for a data breach, and the magnitude of identity fraud by 2018.
“The relationship between data breaches and identity fraud is intuitive — quick access to millions of credentials makes life easy for a fraudster. For criminals looking to make a quick buck, buying breached credentials eliminates the need to directly harvest financial information through malware or social engineering before cashing in at a merchant or by withdrawing funds,” said Al Pascual, Director of Fraud & Security, Javelin Strategy & Research.
The new report forecasts four years of new account fraud, account takeover, and data breach-linked fraud given the expected EMV implementation, based on a survey of 5,000 respondents’ fraud behaviors and the types of fraud experienced. Among the predictions are an increase in CNP fraud losses from $10 billion in 2014 to $19 billion in 2018; a decrease in POS fraud by just $1 billion, or 17 percent, from $6 billion in 2014 to $5 billion by 2018; and a 60 percent jump in account-takeover and new-account fraud from $5 billion last year to $8 billion in 2018.
“This year, breaches at the [point of sale] have driven considerable counterfeit card fraud, which is proving to be a major challenge for financial institutions as they struggle with not only fraud losses but also costs related to re-issuance and servicing,” report author Al Pascual, Javelin’s director of fraud and security, told Digital Transactions News.
“CNP fraud is expected to grow considerably over the next few years, motivated by transaction growth through the channel and a gradual shift in fraud from the POS. There will also be strong growth in both account-takeover and application fraud as criminals attempt to get their hands on cards to misuse at the POS—basically replacing the card data being taken out of the market by EMV.”
The report asserts that “As data breaches account for a growing portion of fraud, demand for different types of credentials and identifiers will move in lockstep with changes in the U.S. fraud environment. While point of sale data dominated 2014, it will give way to card not present data. Credentials with little apparent relationship to financial fraud will become more important as a facilitator of new account fraud and account takeover.”
Retailers need to be aware of these changes in fraud and be proactive in preventive tactics. Pascual warns that banks and card issuers “will need to improve authentication across both the mobile and call-center channels, and they should be making those investments now before it is too late,” in order to limit such fraud.