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FICO Data Shows a Spike in US Credit and Debit Card Fraud

Analysis finds Internet, mail and telephone order fraud growing at 2x the rate of counterfeit fraud, and a continued shift toward debit card usage and debit fraud loss risk

MINNEAPOLIS—August 23, 2012—FICO (NYSE: FICO), the leading provider of predictive analytics and decision management technology, today released data from the FICO® Falcon® Fraud Manager Consortium showing a continuing shift towards online, mail-order and telephone-order fraud versus counterfeit fraud over the same period. In its analysis of losses for credit cards from January 2010 to September 2011, FICO found that card-not-present fraud losses increased at twice the rate of counterfeit card losses.

Though Internet, mail and telephone fraud accounted for the highest total fraud loss and fraud volume, counterfeit fraud has higher average loss per compromised account. The expected introduction of EMV technology in the US promises to boost protection against counterfeit losses. FICO released data in January on European credit cards that showed a 60 percent decline in counterfeit fraud, due in large part to the implementation of chip and pin technology in the United Kingdom.

Regarding debit cards, FICO’s analysis shows usage increasing sharply over the period of the analysis, with a 15 percent increase in overall authorization volume (more people are using debit cards), and an increase in techniques such as skimming, where a criminal installs a device at an ATM or self-checkout aisle at a grocery store to collect personal data, like debit card numbers and PINs, remotely. The top three sources for debit card fraud were ATMs, grocery stores followed by automated fuel dispensers. Top merchant categories for credit card fraud were grocery stores, restaurants and online retailers.

“Continued improvements in fraud controls have succeeded in keeping the fraud genie in the bottle; but fraudsters continue to evolve their attempts to circumvent our efforts, adapting to consumer behavior and simply following the money,” said Doug Clare, vice president of Product Management at FICO. “More online shopping has created a shift towards more online fraud, which is proving to be a popular, relatively safe and anonymous means for fraudsters to exploit any weakness in fraud systems. Consumers and issuers should remain diligent when using cards for point of sale and ATM transactions.”

Clare continued, “It’s worth noting that in the period that we studied, only about 1 percent of debit and credit cards were affected by fraud, which speaks to the strength of FICO Falcon Fraud Manager, which protects more than 2.5 billion payment cards worldwide.  By historical standards, losses remain low.”

The data in the FICO Falcon Fraud Manager consortium represents hundreds of millions of active credit cards and debit cards issued in the US. FICO analyzed its FICO Falcon Fraud Manager consortium to develop the most recent US analytic models for FICO® Falcon® Fraud Manager. These models are now available for FICO clients, and show a marked increase in predictive power compared to previous models. 

About FICOFICO (NYSE:FICO) delivers superior predictive analytics solutions that drive smarter decisions. The company’s groundbreaking use of mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products are marketed. FICO’s innovative solutions include the FICO® Score — the standard measure of consumer credit risk in the United States — along with industry-leading solutions for managing credit accounts, identifying and minimizing the impact of fraud, and customizing consumer offers with pinpoint accuracy. Most of the world’s top banks, as well as leading insurers, retailers, pharmaceutical companies and government agencies, rely on FICO solutions to accelerate growth, control risk, boost profits and meet regulatory and competitive demands. FICO also helps millions of individuals manage their personal credit health through www.myFICO.com. 

FICO: Make every decision count™.
For FICO news and media resources, visit www.fico.com/news.

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