Online dents decline in card fraud
Although SA has seen a decrease in card fraud in 2015, online banking has given rise to card not present (CNP) fraud on credit cards and debit cards.
This was revealed by the South African Banking Risk Information Centre (Sabric), presenting its annual card fraud statistics today.
According to Sabric, the banking industry's gross fraud losses due to South African-issued credit card fraud decreased by 28.6%, from R353.3 million in 2014 to R252.2 million in 2015, while the gross fraud losses due to fraud perpetrated with South African-issued debit cards increased by 8.3%, from R237.4 million in 2014 to R257.1 million in 2015.
The banking industry attributes the overall decrease to the various mitigation measures implemented to fight the scourge of card fraud which have been effective. These measures include the continuous improvement of internal systems and processes, as well as the roll out of chip and PIN technology for debit cards.
Breaking down the figures on credit card fraud, Kalyani Pillay, CEO of Sabric, said CNP credit card gross fraud losses increased by 12.6% (R168.1 million in 2014 to R189.2 million in 2015).
"CNP fraud remained the biggest contributor of fraudulent expenditure on SA-issued credit cards (75%) during 2015," said Pillay.
She attributed the rise to CNP fraud to the increase in online transactions among the South African populace, adding that criminals were stealing users' identities as well as card details to steal money.
According to Pillay, the criminals are mostly making use of social engineering as well as phishing to extract important banking details from the unsuspecting users.
There was also a marked increase in CNP fraud cases on South African debit cards. Pillay noted this can be explained by the fact the banks are now allowing debit cards to shop online in order to make online banking more accessible to clients and the criminals are taking advantage of that.
Lost and/or stolen debit card gross fraud losses increased by 79.3% in 2015 and accounts for 58% of the total debit card fraud gross losses inside SA, says Sabric.
In an attempt to overcome changes in business processes linked to chip and PIN cards, criminals proceeded with modus operandi such as shoulder surfing and card jamming or swopping, Pillay explained. Lost and/or stolen card gross fraud losses are currently at the highest level ever reported, being R112.1 million.
Counterfeit credit card fraud decreased by 45.6% in 2015 (from R89.2 million to R48.5 million) and contributed 19.2% of the overall credit card gross fraud losses. Most (53.9%) of all counterfeit credit card losses occurred inside SA.
Sabric adds counterfeit debit card fraud decreased by 29.5% in 2015 and the gross fraud loss decreased from R114.9 million in 2014 to R81 million in 2015. Counterfeit debit card fraud accounted for 31.5% of the total gross fraud loss on debit cards. The majority of these losses (74.9%) occurred inside SA.
During 2015, Pillay noted, gross fraud losses associated with transactions following a false online application decreased by 93.5% from R86.9 million to R5.7 million and accounted for 2.2% of the overall credit card gross fraud losses.
"This is a significant trend shift from the previous year when losses related to false applications on credit card accounts drastically increased as a result of a spike in fraudulent online applications," she said.
"The banking industry continuously evaluates fraud detection and prevention strategies to mitigate the risk associated with false application fraud, and the benefits thereof have been visible in 2015."
She pointed out that losses related to false online applications accounted for 0.03% of the total gross fraud loss on debit cards. The gross fraud losses associated with the transactions following a false application for a debit card account, decreased 58.5%, from R179 513 to R74 552, she revealed.
Counterfeit SA-issued credit cards are frequently being used by criminals in African countries such as Zambia, Zimbabwe, Namibia, Botswana and Lesotho, Pillay said.