SCA Win? Fraud Rate Dips In France

February 28, 2022
After increasing year-on-year since 2018, Banque de France has said that there are signs that card fraud in the country is dropping and it is partially thanks to strong customer authentication (SCA).

After increasing year-on-year since 2018, Banque de France has said that there are signs that card fraud in the country is dropping and it is partially thanks to strong customer authentication (SCA).

Card fraud in France rates as a percentage of total value of transactions dropped to 0.061 percent, compared with 0.068 percent in 2020, with the central bank stating that it is “getting closer to its all-time low”.

Banque de France released the statistics as part of payments and fraud data from the first half of 2021.

The drop in fraud comes at the same time as payment by contactless card continues to progress, representing 57 percent of total in-person transactions in the first half of 2021, or 3.3bn transactions, up from 46 percent for full year 2020. Fraud rates on contactless payments were significantly lower than the average card rate at just 0.010 percent.

In news that will please the European Commission, there are signs that engagement with instant payments is increasing. In the first half of the year, nearly 62m transactions were undertaken, compared with 45.5m in full year 2020.

However, instant transfers are still marginal, the Banque de France pointed out, representing just 2.6 percent of total number of transactions and 0.6 percent of value.

The SCA effect?

The fraud rate on remote payments dropped significantly in the first half of 2021 to 0.149 percent from 0.174 percent in 2020, which the regulator said is the lowest level ever reached on this initiation channel. “Here we can see the first positive effects of the implementation of strong authentication measures for online payments,” Banque de France said.

“The deployment of strong authentication systems and exemption mechanisms provided for by PSD2 has enabled a significant drop in fraud on online payments since the transactions to which they apply have much lower fraud rates than unmatched transactions security standards,” the central bank said.

SCA began to be implemented in the EU at the start of 2021, although France was one of many countries in the trading bloc that unilaterally opted to pursue a "ramp-up" strategy. This meant that SCA was not fully in force throughout the first quarter of 2021.

However, the implementation of strong authentication is not sufficient to prevent the appearance of new types of fraud that are based on social engineering processes, Banque de France said, noting manipulation of the bearer, and fraud on re-enrolment using a strong authentication solution.

The fraud rate on unauthenticated transactions is the highest at 0.191 percent. These transactions include transactions outside the revised Payment Services Directive (PSD2) framework, such as merchant initiated transactions (MIT), so-called "one leg transactions" for which the card issuer or the acquirer of the transaction is not located in the European Economic Area, and the few transactions that still do not comply with PSD2.

Mobile payments continue to grow in France, with total transactions in the first half of 2021 higher than the whole of 2020, representing 141m transactions worth €2.8bn. At the same time, the rate of fraud across mobile payment, which had deteriorated in 2020, decreased further in the first half of 2021 to 0.048 percent.

Although usage is declining, France is one of the few markets in Europe where cheques are still commonplace. According to the European Central Bank, France accounts for 85 percent of all cheques written across the EU in 2020.

The Banque de France noted that cheques are the only means of payment to record a significant increase in their fraud rate, which stood at 0.097 percent in 2021, compared with 0.088 percent in 2020.

By contrast, most account-to-account payments in France have a significantly lower rate of fraud. Even direct debits, where the central bank noted a slight increase in the first half of 2021, the rate was only 0.0011 percent.

To put this rate in context, this represents a rate of fraud loss of just 1 cent for every €1,000 spent, compared with €1.49 for the equivalent rate of remote payment fraud.

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