23 Mar The progress in fraud detection
An unfortunate reality of the rapid rise of the fintech space is that criminals jump on the bandwagon too by illegally taking advantage of others. Luckily, technology - fintech - provides an excellent solution in combating fraud. This was the subject of a webinar Holland FinTech participated in last week. Here’s our brief report.
Card fraud
The most notorious type of fraud is creditcard related. In 2008 a detailed study was published by the Payments cards and mobile intelligence committee (PCM) on card losses, comparing several countries including the Netherlands. It showed a rise in creditcard losses, which prompted the industry to seek a solution. This year, the PCM decided it was time to update their research. The results showed card losses are still prevalent. The USA tops the list, but then again this country has a far higher creditcard adoption than European countries. The Netherlands has pretty good statistics at first glance as it historically has been a country with one of the lowest levels of card fraud. But the Netherlands is not immune to the tidal wave of financial fraud, due to a rise in skimming attacks on the domestic PIN debit cards, the Dutch debit card brand that ran off mag stripe technology.
The latest trend in criminal activities
Criminals have invented new types of computer fraud:
- Phishing, pharming, hacking and carding.
- 3D-Secure fraud when static password.
- Device manipulation: POS terminal breaches, ATM breaches, Personal PCs and mobile phones.
- Data breaches into processing infrastructures or other places with large stores of card details (such as merchants).
- From petty criminals towards organised fraudster crime.
- From skimming of a single card towards large data breaches.
- From local fraud towards global fraud organised by decentralised international crime gangs.
- From one criminal working across the entire fraud lifecycle, to fraudsters instead specialising on one part of the value chain, and selling that value on to the next level – for example one part of the chain could specialise on getting hold of card data, and another could specialise on actually using it.
Anti-fraud measures
A major step in the right direction was the introduction of the EMV. EMV is a joint effort initially conceived by Europay, MasterCard and Visa to ensure the security and global interoperability of chip-based payment cards. A clear effect of more stringent anti-fraud measures in domestic markets has been that the fraudulent use of cards has moved from domestic to cross-border, into locations where anti-fraud protection is weaker for the time being.
Looking at methods of compromise, undoubtedly, the implementation of EMV cards and 3D-Secure, combined with strong authentication, has contributed to declining fraud rates in Europe. The same is very likely for Canada, where the EMV migration is in progress, and the USA, once the EMV migration is complete there. Other countries should follow suit soon. We at Holland FinTech think FinTech can play a key role in combating fraud, like the use of Big Data and new technologies that can replace the decades old password protection.
For the detailed analysis in PDF format click here.
