More interesting fraud data from the Kansas City Fed

As I mentioned before, "The Changing Nature of U.S. Card Payment Fraud: Industry and Public Policy Options" by Richard J. Sullivan, has some interesting data about the nature of fraud. Here's what's in Table 2 in this document.

Card issuers

billions

Share of total loss

PIN debit

$0.028

Signature debit

$0.337

Credit cards

$1.240

ATM withdrawals

$0.397

Total issuer losses

$2.002

59%

Merchants

POS

$0.828

Internet, mail order, and telephone

$0.568

Total merchant losses

$1.396

41%

Total losses

$3.718

I noticed a few interesting things is this data:

  • Banks actually suffer more from card payments fraud than merchants do – roughly 50 percent more
  • For banks, ATM fraud is a almost one-third of credit card fraud
  • Merchants actually have more POS losses than CNP losses

I wouldn't have expected any of those to be true.

  • Patrick Florer

    $3.7B is a big number, for sure.
    But, as the report also asserts, fraud accounts for about $0.09 per $100 of transactions, which works out to less than 1/10th of a percent.
    I have seen in other sources, which were not referenced, that bad debts cost banks approximatley $4 per $100 – roughly 40 times more than fraud.
    Assuming these numbers to be approximately accurate, I know where I would focus my efforts if I were a bank.
    The report provides figures from a number of years – the fraud numbers I cite are from 2006 – the author also comments that the fraud figure for 2009 declined to $3.3B in absolute terms, but rose somewhat as a percent of total transaction value.

    Reply

  • Luther Martin

    You can find historical charge-off rates for credit cards here:
    http://www.federalreserve.gov/releases/chargeoff/chgallsa.htm
    They’ve gone up a lot in the past couple of years, but they seem to have hovered around 4 percent or so in the past. It looks like charge-off rates are now around 10 percent!

    Reply

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