Payment fraud plateaus in Australia despite soaring card use

Rates of domestic payment card fraud decreased for the first time in Australia, while growth of card-not-present (CNP) fraud fell drastically over the 2018 calendar year, according to the latest figures from the Australian Payments Network (AusPayNet).
 

Growth in all types of card fraud stood at 2.3 per cent over 2018, reaching $574 million, but was significantly outstripped by growth in overall card spending, which increased 5.4 per cent to $789 billion – figures deemed “encouraging” by AusPayNet chief executive, Andy White.

AusPayNet’s Australian Payment Card Fraud 2019 report revealed the rate of payment card fraud in 2018 was 72.8 cents per $1000 of card spending – down from 75.0c/$1000 in 2017 and 74.8c/$100 the year prior.

At the same time, the latest fraud data showed the average value of a fraudulent transaction fell by almost 16 per cent between 2017 and 2018.

On a similar trajectory, CNP fraud grew by just 2.4 per cent in 2018, down from a 13.9 per cent increase the previous year – a shrinking increment credited to the e-commerce community’s progressive uptake of fraud prevention measures.

"People buying goods online may have noticed enhanced steps to have their details verified and they should take confidence from that," White said.

However, despite slowing growth, rates of CNP fraud are still on the rise, accounting for 84.9 per cent of all fraud perpetrated in Australia or on Australian-issued cards over 2018 – mirroring a global trend of financial crime migrating online.

According to AusPayNet, large-scale data breaches, identity theft and the shift away from in-person payment channels – with increasing use of chip technology – were key factors contributing to rising levels of online (CNP) fraud.

However, chip technology was also commended for enabling better protection for in-person transactions, driving counterfeit or card skimming fraud levels to record lows for the second year consecutively with losses totalling $19.5m in 2018 – down 67 per cent from $59.3m in 2016.

As a result of maturing counter-fraud technologies, AusPayNet holds that criminals are opting for simpler, more opportunistic methods. Corroborating this, fraud on lost and stolen cards made up one in 10 Australian card fraud incidents, with 2018 figures ballooning to $55.5m from $40.6m the year prior.

“Close cooperation between financial institutions and law enforcement through AusPayNet’s Fraud in Banking Forum helps build intelligence-led responses to gangs operating in Australia”, AusPayNet’s report disclosed.

While fraud methods continue to evolve, tackling CNP fraud remains top-of-mind for Australia’s payments industry with several sector-wide initiatives cited by AusPayNet.

For one, the CNP Fraud Mitigation Framework, which took effect on 1 July, sets out minimum transaction authentication standards for card issuers and merchants and mandates Strong Customer Authentication for those breaching agreed-upon fraud thresholds.

The framework – implemented after 18 months of industry consultation – also demands quarterly reporting from 15 July, where repeated threshold breaches could trigger enforceable financial penalties for both issuers and merchants.

The Australian Payments Council (APC), on the other hand, was acknowledged for its ongoing efforts alongside the Joint Cyber Security Centre to enhance industry-wide cyber-attack prevention and detection, with financial crime reduction a priority in the council’s 2019 Strategic Agenda.

Another counter-CNP fraud initiative cited in AusPayNet’s report was the federal government’s APC-led digital identity framework, hailed a “world-leading identity regime”, under which Australia Post’s digital ID scheme recently received accreditation.

AusPayNet’s full report, Australian Payment Card Fraud 2019 can be accessed here.