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News
Fed study finds 1. Counterfeit fraud: transactions involving al-
growth in noncash tered or cloned cards
transactions
2. Lost or stolen fraud: transactions involving lost
T he 2016 Federal Reserve Payments Study, pub- or stolen payment cards
lished Dec. 22, 2016, found continued growth
in all types of noncash transactions, particu- 3. Card issued but not received: transactions in-
larly in credit and debit card payments. The volving newly issued cards intercepted en route to
report, sponsored by the Federal Reserve Bank of Atlanta, cardholders and used in fraudulent transactions
includes three separate studies: The 2016 Depository and
Financial Institutions Payments Survey (DFIPS) and the 2016 4. Fraudulent application: transactions involving
Check Sample Survey (CSS), both conducted by McKinsey & cards used by fraudsters who apply for new credit
Co., and the 2016 Networks, Processors and Issuers Payments cards using fake or stolen identities
Surveys (NPIPS) conducted by Blueflame Consulting LLC.
5. Fraudulent use of account number: transac-
The Fed thanked numerous industry stakeholders who tions involving ecommerce fraud committed
responded to its request for public commentary. "Payment without using physical payment cards
industry participation drives the quality of the study's
results," said Mary Kepler, Director and Senior Vice 6. Miscellaneous: transactions involving other
President of the Retail Payments Risk Forum at the Federal forms of fraud such as account takeover and
Reserve Bank of Atlanta. "The Federal Reserve appreciates emerging criminal schemes
the industry's response in 2016 and looks forward to
working with selected participants for the annual data Researchers expressed optimism that U.S. adoption of
collection getting underway in the first quarter of 2017." EMV (Europay, Mastercard and Visa) technologies will
stem the tide of in-person fraud, as it has in other countries.
Increasing fraud monitoring, detection
"While the balance of card fraud in the United States is
The dynamic nature of the evolving threat landscape weighted toward in-person fraud, fraud in other countries
prompted the Fed to increase both the frequency and is highly skewed toward remote fraud," the authors wrote.
thoroughness of its surveys. Previously collected every "Reports from leading [chip-adopting] countries have
three years, survey data will be collected annually starting cited declining counterfeit fraud accompanying rising
in 2017, representatives stated. The Fed hopes these efforts chip adoption, and a similar effect may be observed in the
will help payments industry stakeholders mitigate fraud. United States in coming years."
"To help characterize fraud in the payments system with Increasing noncash market share
more specificity, the 2016 study collected information on
payment fraud reported by fraud type by general-purpose The study found an estimated 144 billion in U.S. noncash
card networks along with information about the rollout of payments, reflecting an annual increase of 5.3 percent
embedded microchips in payment cards that is intended since 2012. Noncash transactions increased 3.4 percent to
to help combat card fraud," report authors wrote. nearly $178 trillion, largely due to increasing acceptance
of credit and debit card payments and adoption of new
Kepler said the increased frequency and thoroughness of mobile and virtual payment schemes, researchers noted.
research "reflects an increased desire within the payments
industry for additional fraud-related information." "Taken together, debit cards (including prepaid and non-
prepaid cards), credit cards, ACH credit transfers, ACH
She noted that a limited amount of fraud-related debit transfers, and checks compose a core set of noncash
information was available when the report was published, payment types commonly used today by consumers and
adding, "further results will be released in 2017 as the businesses in the United States," the authors wrote. "These
complete data set is more fully reviewed and analyzed." core noncash payment types are used both in traditional
ways, such as in-person purchases, payroll deposits,
The report cited six common forms of fraudulent payment and bill payments, and in relatively new ways, such as
card transactions, initiated in-person or remotely: mobile payments, e-commerce payments, and online bill
payments."
For additional highlights and insights pertaining to the
2016 Federal Reserve Payments Study, see "Fed updates
payments data," by Patti Murphy, in this issue's Views
section (The Green Sheet, Jan. 9, 2017, issue 17:01:01)
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