Rate of card fraud stable despite surge in online spending; scamming activity on the rise


25 August 2022 

Rate of card fraud stable despite surge in online spending; scamming activity on the rise

Figures released today by Australian Payments Network (AusPayNet), the payments industry self-regulatory body, show that industry efforts to combat payment card fraud are bearing fruit, with card fraud rates stabilising despite a surge in online card payments.

Data for the 12 months to 31 December 2021 reveals that while card payments grew by 8.0% to $865 billion and online spending by 8.2% to $53 billion, the incidence of all card fraud grew at a slower pace, by 5.7% to $495 million for the year.

Card-not-present (CNP) fraud – mainly affecting online purchases - accounted for 91% of all fraud on Australian cards in 2021, reflecting the migration of fraudulent activity to the online environment as e-commerce becomes more popular with consumers and grows.

CNP fraud involves valid card details being stolen by criminals and used to make purchases or other payments without the card being present, usually online. In 2021, CNP fraud was up 7.6% to $452 million, remaining below the peaks observed in 2018 ($489 million) and 2017 ($476 million).

Importantly, the rate of fraud on Australian card payments in 2021 was steady at 57.3 cents per $1,000 of spending, compared to 58.6 cents in 2020.

Stabilisation of the fraud rate coincides with AusPayNet’s introduction in 2019 of the CNP Fraud Mitigation Framework to counteract rising rates of CNP fraud. The framework encourages merchants to accelerate uptake of secure technologies offered by banks, card schemes and payment service providers/gateways such as real-time monitoring, machine learning, tokenisation and strong customer authentication.

In the three years prior to the introduction of the framework (2016-2018) the fraud rate averaged 74.3 cents per $1,000 spent.

Counterfeit and skimming fraud fell by more than half in 2021 to $5.5 million, a record low for this type of fraud. Lost-and-stolen-card fraud was up 9.3% to $28.9 million, possibly attributed to the easing of lockdown restrictions in many states opening up opportunities for card theft.

AusPayNet CEO Andy White said that the CNP framework had prompted merchant adoption of technologies to detect and prevent fraudulent transactions.

“Criminal groups continue to target online transactions partly because that’s where the growth in card spending is, but also because avenues for skimming and other types of card fraud have become more difficult to perpetrate since the introduction of EMV chip technology,” he said.

“The signs are that industry collaboration is beginning to have an impact on the incidence of CNP fraud but there is a long way to go. Financial institutions, merchants and consumers all have a role to play in being alert to the threat of fraud and taking simple steps to prevent it.”

“At the same time, as the industry sharpens its focus on combatting card fraud there are signs that criminal groups now see scams as the next frontier for illicit gains,” Mr White said.

In its annual Targeting Scams Report, the Australian Competition and Consumer Commission (ACCC) estimated that Australians lost over $2 billion to scams in 2021.

“As with payments fraud, collaboration across stakeholder groups and end user awareness are critical to preventing scam activity.”

The Economic Crime Forum (ECF), established by AusPayNet in 2021, brings together industry participants to coordinate a joint response to all economic crime – scams, fraud, financial crime, and banking-related cyber incidents – and share intelligence on emerging threats. The ECF includes representatives from AusPayNet’s 152 members and Australia’s State and Federal policing agencies, intelligence agencies and regulators.

The ECF’s current priority is investment, romance and remote-access scams, which industry data shows account for about 80% of scams by value and volume.

AusPayNet’s scams mitigation program developed alongside the Australian Banking Association (ABA), Australian Financial Crime Exchange (AFCX), and not-for-profit identity and cyber support service IDCARE, seeks to make Australia an unattractive target to scammers.

Read the full Australian Payment Fraud 2022 report.