Is Debit Card Fraud a More Significant Problem Than Check Fraud?
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According to the 2009 ABA Deposit Account Fraud Survey Report, debit card losses totaled $788 million in 2008, compared to $1.024 billion lost to check fraud. On the surface, clearly check fraud is a larger problem. Surprisingly, however, more banks reported experiencing debit card fraud losses than check fraud losses. While 92% of survey participants reported experiencing debit card fraud, only 80% of banks reported experiencing check fraud losses.
Due to the significant increase in debit card fraud, this is an area banks must not become complacent about, particularly with point of sale transactions. When a merchant accepts a counterfeit check at the point of sale, the paying bank has a defined time period to analyze the transaction, looking for unauthorized or fraudulent activity. When that same merchant accepts a debit card at point of sale, and obtains authorization from the issuing bank for the transaction, the bank will most likely incur a loss should that transaction be unauthorized or fraudulent. Clearly, there is a shorter timeframe to detect debit card fraud compared to check fraud.
Another difficulty in fighting debit card fraud is that most debit card fraud prevention solutions lack the ability to look beyond a purely transactional view. Most banks that utilize a real time debit card fraud solution are very limited in their analysis due to this transactional silo effect. The solutions only look at transactions one at a time, and as a result, the bank will typically incur a loss on the first fraudulent transaction but be successful in detecting additional fraud on subsequent card transactions.
Adding a supplemental, more contextual, fraud detection capability to your existing debit card fraud prevention solution, can help detect and prevent more fraud. By analyzing clusters of data in defined contexts, you can identify suspicious fraud activities that may not be detected by the transactional debit card fraud solutions you have today.
Contextual fraud detection might include: looking for a high volume of transactions from multiple customers' cards coming in from a merchant you haven't seen prior activity on, multiple transactions coming in on the same card from geographic locations that are not physically possible based on elapsed time between transactions, or large payments to a credit card being initiated at the ATM and the credit card then quickly being charged back to its limit before time allows the payment to be returned. Reducing false positives and enhancing your customers' experience are achievable goals with greater flexibility in debit card fraud prevention capabilities.
What's your opinion? Looking at 2010, are you more concerned about containing check fraud or debit card fraud? Which is more challenging to contain?