CARPINTERIA, Calif. (8/21/13)--Of the $21.604 trillion in purchases by all payments cards in the world in 2012, more than $11.27 billion was lost by issuers, merchants and acquirers due to fraud, says the Nilson Report. That is an increase in fraud of 14.6% over 2011.
The Carpinteria, Calif.-based publication pointed out, however, that the percentage of fraud remains near the historical low. Although the percentage of fraud to total volume has increased the past two years, the increases come after an eight-year period where fraud percentages were flat.
Losses at card issuers--including credit unions and banks--made up 63% of the losses, with merchants and acquirers losing 37%, said Nilson. Card-issuer losses occurred mainly at the point of sale through counterfeit cards. Merchant and acquirer losses occurred mostly from card-not-present transactions on the Web, at a call center or through mail order because issuers can charge back fraudulent transactions.
Gross losses totaled 5.22 cents for every $100 in volume--up from 5.07 cents per $100 in 2011. PIN-based debit cards saw the lowest percentage of fraud, with 1.10 cents per $100 in volume. Global brands such as Visa and MasterCard averaged 6.13 cents lost per $100.
In the U.S., losses on all general purpose and private label, signature or PIN payment cards totaled $5.33 billion last year, up 14.5%. Issuers lost 64% or $3.41 billion, and merchants lost 36% or $1.92 billion. The U.S. accounted for 47.3% of the global card losses but generated only 23.5% of the total card purchase volume.
The U.S. has the lowest amount of cash as a percentage of total volume than all other regions except Canada, said the report. Cash withdrawals, protected by PINs, have lower losses, and when the fraud at an ATM is "on-us," the theft isn't reported to any network.
The absence of EuroMasterCardVisa (EMV) cards and terminals in the nation contributed to the U.S. losses, said Nilson.
For the record. total card volume was up 11.4% from 2011 for credit, debit and prepaid general purpose and private label payment cards. Totals by card companies included: Visa with $537.27 billion, American Express with $309.70 billion, MasterCard with $280.82 billion, and Discover with $64.69 billion.
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