Credit Card Fraud Increasing in Germany

Credit card fraud increased last year in Germany according to FICO, which reports that a sample of 7.5m active cards issued in the country showed losses due to fraud up by 17% over the period October 2013 to September 2014 from a year earlier.

The analytics software company, formerly Fair Isaac, added that growth outstripped that of total card purchases, which rose just 5%. The number of successful fraudulent attempts rose by as much as 30%, while total authorised transactions rose just 8%.

“All in all, fraud in Germany is running at a low level,” said Martin Warwick, FICO’s fraud chief in Europe. “On the 270m transactions we studied, fraud accounts for just 0.07% of transactions, and fraud losses represent just 0.1% of total sales. But the rate at which fraud is increasing is high, and warrants renewed attention from issuers.”

Warwick considers it significant that the number of fraudulent transactions rose faster than fraud losses, which means the average loss per incident is lower. “Criminals are constantly adapting their strategies,” he said. “It looks as if they are targeting transactions in smaller amounts, presumably because they think it is easier to avoid counterfeit transactions being detected.”

The twin trends driving card fraud higher were card-not-present (CNP) fraud, which includes online card purchases, and cross-border card fraud. CNP fraud accounted for around 70% of the card fraud seen in the FICO sample, and cross-border fraud accounted for 80% – many incidents were CNP and cross-border. While most German-issued cards have chips, chip transactions – such as at a retailer’s card reader – accounted for only 10% of fraud.

“These figures reflect two important insights,” said Warwick. “Firstly, the introduction of chip-based cards is an important part of combating fraud. But it’s not enough – because CNP transactions don’t rely on physical card security measures that is where the criminals are going.

“The industry needs to adopt the latest analytics to detect fraud in CNP transactions, and be even more rigorous around data security, as today’s data theft is tomorrow’s fraud.”

Criminals favored travel-related purchases in the sample analysed. Travel agencies and tour operators (16.1%), airlines in general (4.5%), and hotels and other accommodation (3.1%) collectively report around one quarter of German fraud losses.

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