The Federal Reserve bank of Minneapolis released its 2014 payment fraud summary survey of banks. Why is this interesting? From the executive summary:
Payments fraud remains a significant concern for financial institutions and other corporations in the ninth district and surrounding region. While financial institutions are much more likely to report payment fraud attempts (75% experienced attempted fraud) and losses (70%) than non-financial companies, the proportion of financial institutions reporting fraud attempts and losses has actually decreased since 2012, when most respondents reported fraud attempts (94%) and losses (90%).
While attempted payment fraud has decreased over the past two years from 94% to 75% is still at a very high level. The financial institutions have been implementing stronger fraud prevention techniques which are beginning to have some success. Beginning in October 2015, merchants that haven’t installed a card swipe terminal that accepts chip cards will be liable for all the fraud involved with a chipped card. This policy is making the merchants accept some of the burden of fraudulent charges. Currently the financial institutions bear the majority of the direct cost of fraudulent charges.
In 2015 if you have the option to change your credit or debit card to a chipped card I would recommend that you do so. This will better protect you and your financial institution from having your information “stolen.”
I have been wondering why the financial institutions don’t change their credit and debit cards from an “always on” model to a model where your credit card is “always off.” In other words when I go to purchase something at the store when I am ready to complete the purchase I tap an app on my phone and turn on the card for a single purchase and it automatically turns the card off after the transaction is complete. This model would certainly cut down on the amount of fraud that is generated, and it appears that we have all the technology we need to accomplish it.
The full text of the Federal Reserve fraud summary can be read here: