Survey of Financial Institutions Finds Wide Fraud Loss Ranges in the U.S. Market

Navigator Edition: February 2016
By: Casey Merolla and David Cencula

In a recent First Annapolis study of financial institution fraud experience in the U.S., participants reported average fraud losses (net fraud) in the first half of 2015 of 13.1 bps and 7.7 bps on credit and signature debit volume, respectively. Net fraud was relatively stable compared to 2014, in which losses of 12.1 bps and 8.1 bps were observed. Financial institutions experienced a wide range of net fraud, with an 8 point spread in credit fraud losses and a 14 point spread in signature debit fraud losses.

Consistent with previous years, the majority of confirmed fraud by dollar volume was attributed to counterfeit cards; card not present fraud accounted for the second highest volume. The two combined to represent 87-88% of total gross fraud in credit and debit portfolios. As the number and volume of EMV transactions increase in the coming years, we anticipate a noticeable decrease in the proportion of fraud attributed to counterfeit cards.

The study included additional analysis on fraud operations performance metrics that were shared exclusively with the participating financial institutions to show the FI’s metrics compared to industry standards and to highlight areas of improvement. Additionally, the study’s findings will provide a helpful benchmark for comparing fraud rates in pre- and post-EMV implementation environments.

First Annapolis completed its 2015 Card Fraud Study in December 2015. Using data from a sample of local, regional, and national financial institutions in the U.S., the study examined gross fraud, fraud losses, and various fraud metrics from 2014 and the first half of 2015. Five credit card portfolios and ten debit card portfolios were used in the study, with a total of ten financial institutions participating.

Figure 1: BPs of Fraud Losses on Total Dollar Volume

Figure-1_-BPs-of-Fraud-Losses-on-Total-Dollar-VolumeSource: First Annapolis Consulting 2015 Card Fraud Study, December 2015.

Figure 2: Categories of Total Confirmed (Gross) Fraud
by Dollar Volume

Figure-2_-Categories-of-Total-Confirmed-(Gross)-FraudSource: First Annapolis Consulting 2015 Card Fraud Study, December 2015.

For more information, please contact Casey Merolla, Senior Manager,; or David Cencula, Senior Analyst, Both specialize in Payments Strategy and Innovation.

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