In 2020, the cost of fraudulent transactions increased by 18% compared to 2019 – a similar development was reflected in the number of fraudulent transactions, which increased by 76% compared to the previous year.
The cost of fraudulent transactions with credit cards issued under the Single Payment Area (SEPA) in 2019 was 1.87 billion euros. This amount represents only 0.036% of the total value of card transactions and is the second lowest level of fraud since data collection began in 2007.
For cards issued only in the euro area, the total amount of fraudulent card transactions was € 1.03 billion. According to a report from the European Central Bank, the share of fraud in total transactions declined in 2019 as the number of fraud cases in absolute terms increased more slowly than the number of card payments.
Fraud in Greece
As for our country, according to the National Bank of Greece (financial stability report – June 2021), in cases of fraudulent transactions with payment cards in 2020, an increase in the cost of fraudulent transactions was recorded by 18% compared to 2019. Despite the increase in the scale of scams, the ratio of the number of cases of fraud to the cost of transactions continued to remain at a low level of 0.02%, which corresponds to a cost of fraud of € 1 for a transaction of € 5.1 thousand.
A similar dynamic was reflected in the number of fraudulent transactions, which increased by 76% over the previous year. The ratio of the number of scams to the number of transactions increased compared to 2019, but remained at a low level of 0.04%, which corresponds to 1 fraudulent transaction per 2.6 thousand transactions.
However, we must remember that due to the pandemic and the shutdown of physical stores, the number of card transactions has increased significantly, and many cardholders do not know how to conduct secure online transactions in online stores.
With regard to fraud by type of transaction, it has been established that:
Most of the fraudulent activities continued to occur in No-Present-Card (CNP) transactions over the Internet or by mail / telephone. The incidents mainly concern online transactions with foreign companies, as in previous years.
Further investigation of the fraudulent activity that occurs in remote transactions via the Internet or by mail / telephone reveals that most of the fraudulent transactions are conducted over the Internet. (see diagrams V.9 and V.10).
Financial losses resulting from fraudulent transactions are shared between the parties to the transaction through their fault.
Based on the distribution of losses between the three parties in the payment card transaction cycle, it was found that most of the losses are borne by the payment service providers who accept card transactions and which in 2020 took on 48% of the total losses. Accordingly, the payment card providers were charged a commission of 23%. Cardholders accrued 29%.
They lose 3.6 cents for every € 100 transaction.
The ECB notes that the likelihood of card fraud may have improved slightly, but the market, regulators and consumers should remain vigilant. While the number of frauds declined slightly in relative terms in 2019, overall levels remain unchanged and are increasing in absolute terms. In addition, the recent increase in card payments for electronic purchases during the COVID-19 pandemic has made these payments a desirable target for criminal activity (for example, through phishing).
Thus, the total amount of transactions with cards issued under SEPA and purchased worldwide increased by 6.5% compared to 2018, while related fraud increased by 3.4%.
As a result, the share of fraud in the total value of transactions decreased by 0.001 percentage points to 0.036% in 2019. Over the five years from 2015 to 2019, the lowest fraud rate was observed in 2017 (0.035%), which was the lowest since the start of data collection in 2007.
In practice, a 0.036% share means 3.6 cents is lost to fraud on every € 100 transaction using cards issued under SEPE in 2019. For cards issued in the euro area, the cost of fraud, as a share of all card transactions in 2019, remained below the SEPA share as a whole at 0.032%, although it rose slightly from 0.031% in 2018.
Card fraud consists of: fraudulent transactions with physical cards (presence of card fraud), for example, withdrawing cash from counterfeit or stolen cards; fraudulent remote transactions (offline card fraud), such as when criminals make online payments using card details obtained through phishing or data breaches.
The vast majority of fraudulent transactions still involve Offline Card (CNP) scams. In 2019, 80% of the amount of card fraud accounted for CNP transactions, that is, payments via the Internet, mail or phone. In contrast, physical point of sale (POS) fraudulent transactions such as personal payments at retail stores or restaurants and ATMs accounted for only 15% and 5% of the total cost of card fraud in 2019, respectively.
Losses from CNP fraud in 2019 amounted to € 1.50 billion, up 4.3% on the previous year. Partially available data on the total number of CNP transactions suggests that fraud has grown at a much slower rate than the total number of CNP transactions in 2019. In terms of card transactions, POS fraud increased by 2.2% in 2019, while ATM fraud decreased by 6.1%. The latter is the result of a significant reduction in fake ATM fraud associated with transactions purchased outside of SEPA. Because the global adoption of chip technology in bank cards has significantly reduced the potential for fraud compared to magnetic stripe cards.