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Criminals shifting to card-not-present fraud because of chip and PIN success

FICO today released its analysis of data showing that major shifts have occurred in European card fraud patterns. Analysis done on 55 million active credit cards represented by FICO showed that counterfeit fraud fell 60 percent between March 2009 and March 2011.

FICO’s data also shows that card-not-present fraud accounted for 69% of all accounts victimised by fraud and 72% of all fraud losses. The top 10 merchant categories accounted for 30% of the total fraud losses, led by hotels/lodging, travel agencies and ATMs.

“Our analysis of the data shines a spotlight on the tremendous change that has occurred in Europe’s fraud landscape,” said Martin Warwick, FICO’s Fraud Chief in Europe, the Middle East and Africa.

“Chip and PIN technology has radically driven down counterfeit and other forms of ‘card present’ fraud in the UK, which just three years ago accounted for some 60% of Europe’s credit card fraud. In response, criminals are operating across borders, targeting countries such as Germany that have weaker detection and prevention capabilities, and shifting their attention to card-not-present schemes such as online fraud.”

“It’s worth noting that in the two-year period, only about 1 percent of cards we studied were affected by fraud,” Warwick added. “That speaks very well of the effectiveness of FICO Falcon Fraud Manager, the most widely used credit card fraud solution in Europe and the rest of the world. FICO Falcon Fraud Manager plays a massive role in allowing banks to balance powerful fraud protection with a positive customer experience at the point of sale — for example, it helped UK issuers reduce card-not-present fraud by £100 million between 2008 and 2010.”

FICO’s data comes from card issuers in Germany, the UK, Ireland, the Netherlands, Poland, Switzerland and Turkey. FICO analysed this data to develop the UK & Ireland Credit version 13 and European Union Credit version 5 analytic models for FICO Falcon Fraud Manager.

These models are now available for FICO clients in the region, and show a marked increase in predictive power compared to previous models — the amount of fraud detected at a false-positive ratio of 10:1 increased by 56 percent for the UK/Ireland models, and 24 percent for the Europe models.

FICO Falcon Fraud Manager protects more than 2 billion payment cards worldwide.

Top Fraud Merchant Categories:

Lodging- Hotels, Motels, Resorts 5.63%
Travel Agency and Tour Operations, Excluding Air Passage 4.31%
Automated Tellers/Cash Disbursement 3.71%
Grocery Stores, Supermarkets 3.47%
Eating Places, Restaurants 2.68%
Electronic Sales (Radio, Television, Stereo etc.) 2.32%
Department Stores 2.17%
Airlines, Air Carriers, and Travel Agency Transactions with Air 2.10%
UK Supermarkets 1.98%
Service Stations With or Without Ancillary Service 1.84%

Source: FICO

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