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New statistics published by the European Central Bank (ECB) have found that the rate of card fraud has reduced in the EU, even as more payments move online.
Despite a small increase in overall card fraud, the rate of fraud decreased in 2019, according to the ECB’s latest data which focused on the five-year period from 2015 to 2019. The ECB said that further reductions should be expected due to strong customer authentication (SCA).
The reports also noted that the share of fraud to total value of transactions was lower from 2017 to 2019 than in previous years, indicating a trend in the declining rate of fraud.
This was supported by the implementation of various fraud prevention measures by payment service providers (PSPs) and card payment schemes, such as EMV standards, card tokenisation and geo-blocking, along with efforts by European regulators to strengthen the security requirements for card payments with the revised Payment Services Directive (PSD2), according to the ECB.
Deconstructing card fraud in the EU
The total value of overall card transactions used both domestically and internationally by cards issued within the Single European Payments Area (SEPA) increased 6.5 percent in 2019, nearly double the rate of corresponding fraud on cards (3.4 percent).
Consequently, fraud as a share of the total value of transactions decreased by 0.001 percentage points to 0.036 percent in 2019.
According to statistics, more than half of the total value of fraud in 2019 was related to cross-border transactions within SEPA. Domestic transactions accounted for 89 percent of the value of all card transactions in 2019, yet only 35 percent of fraudulent transactions. By contrast, cross-border transactions within SEPA represented 9 percent of all card transactions in terms of value, but 51 percent of reported fraud. Two percent of all card transactions were acquired outside SEPA, accounting for 14 percent of fraudulent activity.
Looking forward, “the implementation of the RTS for SCA and CSC under PSD2, which entered into force in 2019, should make card payments even more secure and reduce opportunities for fraud”, the ECB notes.
The first experiences reported by individual card payment schemes already appear encouraging, although it is too early to draw market-wide conclusions, the ECB continued.
However, the full extent of the picture will not be known until 2023, according to a source close to the project, who stated that data is reported to the Frankfurt-based institution with a time lag.
The ECB is currently finalising the collection of payments data for 2020, which it intends to publish in late 2022.
However, if the latest data from the UK — among the largest card users in Europe — is any indicator, further falls in the rate of card fraud can be expected.
Based on data from UK Finance’s Fraud the Facts, the rate of fraud on cards (percent of fraud to total value of transactions) fell 13 percent over the two-year period between 2018 and 2020.
Unlike the EU data for 2019, this fall in rate of fraud was also accompanied by a decline in fraud losses in absolute terms. In the same two-year period, losses from fraud fell 14 percent, while in the first half of 2021 total card fraud losses declined 9 percent on the same period two years ago.
However, it should be noted that the EU card fraud rate of 0.036 percent in 2019 is significantly below the 0.060 percent experienced in the UK in 2020.
Continued vigilance
Although the falling rate of fraud is good news for the payments industry, it should be tempered by the fact that it still represents a significant problem.
For this reason, the ECB used its new report to warn that this falling rate does not mean payments players should not be vigilant, particularly due to how COVID-19 has changed payment behaviours in the EU and further afield.
“The recent surge in card payments for online purchases during the COVID-19 pandemic may increasingly make such payments the target of criminal activities,” the report says, citing phishing as a key example.
New reports from Sweden and Austria
As the ECB publishes pre-COVID data from 2019, elsewhere in Europe central banks are continuing to report on more up-to-date trends detailing a growing digital push.
Riksbank’s new payments report published this week has concluded that the pandemic has meant cash use has declined at a rapid rate.
Only 9 percent of the Swedish population paid for their most recent purchase in cash, the central bank noted referencing a recent survey, while cash withdrawals declined by 20 percent in 2020 and the trend continued in the first half of 2021.
The central bank also referenced increased usage of mobile payment app Swish. The service, which was primarily developed to support person-to-person payments, has recently seen significant growing acceptance for use at retailers and businesses.
In January 2020, there were around 12m Swish payments made by consumers to businesses. this has increased to almost 23 million transactions per month by August 2021.
The pandemic also meant an increase in card and digital payments in cash-loving Austria, with the country’s national bank having uncovered a rise in the use of contactless at the point of sale. This has also supported a 10 percent increase in debit card transactions in 2020.
However, cash still dominates the country’s payments sector and looks set to continue in the near future despite the impact of the pandemic encouraging more digital payments. Although cash usage declined 13 percent in 2020, the central bank reports it is still the most common method of payment.
Around a quarter of Austrians surveyed acknowledged that they used less cash during the COVID-19 pandemic, and the vast majority of them intend to continue doing so even after the crisis has subsided, according to the central bank.
Alternative payments and mobile payments in Austria also have a long way to go. According to the central bank, only 0.7 percent of transactions made at the point of sale used a mobile phone method, such as Apple Pay.
