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U.S. is global leader in payment card fraud

by Peter Andrew

It's not a title to which any country would aspire, but a recent report suggests that America leads the world in plastic-based fraud. In this context, "plastic" covers prepaid, store, debit and credit cards of all types. The data, published last week, came from payment-industry newsletter The Nilson Report.

Guard your card

Part of the cause of this global leadership is probably America's love of plastic: we generally use cards for payments more frequently than people in other countries do. However, that's only a small part of the explanation. The U.S. was home to 23.5 percent of all the world's card transactions by volume in 2012, but but accounted for very nearly half (47.3 percent) of all fraudulent ones.

Card fraud cost the country $5.33 billion last year, a rise of 14.5 percent compared to 2011. Nilson says that the U.S. is the only nation that continues to experience such large and consistent increases in losses.

Credit cards to be more secure

America stands to turn around its unique exposure to plastic fraud when EMV, the technology that uses a microprocessor chip embedded in each card to process transactions, gains traction here. U.S. credit card companies are already issuing some EMV-enabled products, and expect to make them near-universal over the next few years.

However, most American card issuers aren't currently planning to adopt chip-and-PIN, the most secure form of EMV. With chip-and-PIN, you type your personal identification number (PIN) into a point-of-sale terminal when using a card embedded with the microprocessor chip. Instead they intend to use chip-and-signature, so you just sign at a point of sale. Payment networks that use chip-and-PIN experienced fraud losses of just 1.10 cents per $100 in 2012, compared with a global average of 5.22 cents.

Last December, IndexCreditCards.com discussed some of the reasons why adopting a signature-based system seemed such a bad idea. Nothing much has changed.

Published 09/04/13 (Modified 11/18/13)


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