Card fraud rates plummet despite Covid-19 ePayments surge, yet AusPayNet urges continued vigilance from industry

Card Fraud AusPayNet

A year on from the introduction of its card-not-present (CNP) Fraud Mitigation Framework, AusPayNet has reported a more than two-fold drop in card fraud rates, despite a surge in ePayments during the Covid-19 lockdowns.

Overall card fraud rates declined 15.4 per cent over FY20, according to AusPayNet, the Australian payments sector’s chief representative body, more than double the rate of decline in the previous financial year, which saw a 6.9 per cent drop.

Over the same period, total card spending grew by 0.5 per cent to $803.4 billion.

This translates to a rate of 56 cents of fraud per $1,000 in spending over FY20, down from 66 cents per $1,000 over FY19.

FY20 also saw a surge in eCommerce transactions, with online shopping soaring by 80 per cent year-on-year in the eight weeks following the official declaration of Covid-19 as a global pandemic, according to Australia Post figures, which conducted its own eCommerce industry survey earlier this year.

Despite this rapid growth in eCommerce, CNP fraud – which occurs when a card is not physically present at the time of payment – has declined markedly over the last year, AusPayNet figures reveal.

This is a notable drop, as CNP fraud, which is typically associated with online transactions, makes up by far the largest proportion of all fraud cases (in FY20, representing 87.7 per cent).

CNP fraud fell by 5 per cent to $455.5 million over FY19 (which was Australia’s first-ever recorded decline in card fraud rates) and a further 14 per cent to $392.4 million over FY20.

As a result, the 2019 year saw total card fraud fall by a staggering 20 per cent.

These “encouraging” data points reflect the initial impacts of “coordinated industry efforts” to combat CNP fraud, said AusPayNet – efforts largely shaped by AusPayNet’s CNP Fraud Mitigation Framework.

The Framework took effect on 1 July 2019.

In addition to CNP fraud, other fraud categories also fell over FY20; lost and stolen card fraud dropped 28.5 per cent to $30.8 million, whilst counterfeit/skimming fraud fell by almost a quarter to $14.0 million.

Despite the positive news, however, AusPayNet chief executive Andy White urged for continued vigilance from payments providers, with “scams” emerging as a key concern.

While the drop in fraud rates is promising, they also serve as a reminder for industry of the need to further collaborate to reduce fraudsters’ attack vectors, he said.

“Experience tells us when you close off one avenue for fraud, criminals waste little time looking for new ones to exploit,” White said.

White warned the industry against complacency, anticipating a surge in the use of eCommerce services as the pandemic lingers and the holiday period approaches.

AusPost predicts online spending will jump from a 9 per cent share of the total retail market last year to a 15 per cent share by the end of 2020.

White also singled out the AusPayNet’s ongoing work on its TrustID framework – an effort to improve credential authentication among FSIs – as key to stemming future incidences of fraud.

The TrustID framework addresses concerns resulting from a “proliferation of identity credentials and passwords”, particularly given the emergence several competing digital identity solutions in Australia, reducing the need for individuals to share personally identifiable information.

The TrustID framework, which is purpose-built for the financial sector, is designed to “complement” the Australian Government’s Trusted Digital Identity Framework (TDIF), which similarly sets out guidelines for identity solutions to help citizens connect with government services digitally.