Banking Industry Security for Credit Card Fraud Patterns

Publication Date: 01/09/2014

The latest figures for banking industry card fraud losses released by the South African Banking Risk Information Centre (SABRIC) show that credit card and debit card fraud levels have decreased.

The banks’ gross credit card fraud losses for January to September 2012 amount to R300,4m, an 18% decrease from gross losses of R367,4m in 2011. Debit card fraud gross losses amounted to R204m in 2012, compared to R219,9m in 2011, a 7% decrease.

Gauteng, Western Cape and KwaZulu-Natal account for 91% of credit card fraud losses recorded in 2012, as was the case 2011. The bulk of debit card fraud losses during 2012 occurred in Gauteng, KwaZulu-Natal, the Eastern Cape and the Western Cape.

‘The downward trend in card fraud losses this year is attributed to the efforts of the banking industry, law enforcement and most significantly, bank customers, who are seemingly responding to the industry’s calls for safe banking practices,’ said SABRIC CEO Kalyani Pillay. ‘We encourage all bank customers to continue this trend as it supplements the banking industry’s efforts to achieve a safe banking environment.’

Lost and stolen credit card fraud decreased by 15%, from R18,3m in 2011 to R15,6m in 2012. The downward trend in incidents of credit card fraud due to lost and stolen cards began in 2009 and this reflects the impact of the rollout of chip and PIN cards and other banking industry’s card fraud prevention strategies.

Counterfeit card fraud decreased by 45% in 2012 and contributes 38% of overall credit card fraud gross losses. This is a significant trend shift as counterfeit card fraud was the single biggest contributor to the banking industry’s card fraud losses for the past three years.

However, SABRIC says that Card Not Present (CNP) fraud increased by 16%, from R133,4m in 2011 to R154,8m in 2012, and contributed 51% of the total credit card fraud losses in 2012. CNP is now the single biggest contributor to credit card fraud losses on SA-issued credit cards. In addition, the banking industry’s credit card fraud losses from false-application fraud increased by 226%, from R4,1m to R13,4m. Losses related to account-takeover fraud have also increased by 38%, from R0,8m in 2011 to R1,1m in 2012.

CNP fraud losses have been on the rise steadily over the past few years,’ Pillay explains. ‘This is not an unusual trend, as a similar pattern is witnessed in most EMV-compliant [what is EMV-Compliant? Please insert as a side info on what is EMV as not all readers know the global standards of chip based technology] countries such as the UK and Australia. Criminals tend to use stolen card information to perform online purchases as they are deterred by chip and PIN technology.

‘The percentage increase in false-application fraud should also be seen in the context of the low-base figures representing this crime trend. The banks have recently acquired access to the Home Affairs National Identification System (HANIS), and we are highly optimistic that the roll-out of this system in bank branches will have an impact on fraud losses due to falsified documentation.’

‘The banking industry’s debit card fraud losses in 2012 are mainly attributable to “counterfeit debit card” fraud,’ Pillay says. ‘Criminals need a combination of the magnetic-strip information at the back of the debit card and the PIN in order to commit counterfeit debit card fraud. It is for this reason that we urge bank customers to familiarise themselves with the most prevalent card skimming modus operandi, be it handheld or ATM-mounted skimming, since the majority of counterfeit debit card fraud can be directly linked to card skimming. SABRIC says that the banks have made driving down card fraud a priority and will continue to invest customer education initiatives.

Pillay advises, ‘Never let your card leave your sight when making transactions, and also make sure to inspect the ATM for any foreign objects on the mouth of the card slot to ensure that your card is not skimmed. Customers should also make it a practice to cover the PIN pad when keying in their card PIN.’