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.

Comments

[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!

[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.