Recently, FICO released a dynamic map outlining the evolution of card fraud in Europe and uncovered several pretty interesting discoveries. While several countries see fraud declining, there are quite a few that have seen it increase—some aggressively. FICO used this data to come up with a few predictions for the coming years about the changes we can expect to see in fraud prevention practices. 2013 was a rough year in general for fraud losses as Europe reached their all-time high—£154.9 million. The majority of this number came from France, Germany, and Russia, France taking the lead with a whopping 62%. The prediction here is that such a high loss will start to inspire regional bodies and card issuers to start to explore fraud prevention efforts, similar to their reaction after a large spike in 2008. Generally, companies don’t put very much money toward fraud prevention when losses are low because the return on investment doesn’t appear to be worth it.

After EMV removed £246 million worth of fraud between 2004-2006, that fraud migrated to worldwide ATM hacks and card-not-present (CNP) fraud. In this case, fraud as a whole actually rose at first following EMV. One of the most common methods to measure fraud loss is by use of “basis point,” whereas 100 basis points = 1% of card sales. Low threats are represented by basis points below 5, while anything between 5-10 is concerning. Once basis points exceed 10, fraud activity has become extreme. That said, low basis points doesn’t necessarily mean a country is protected. The example FICO gives is the increase of card use in Russia. When such a large country starts using payment cards more often in general, it can disguise the overall fraud threat. FICO predicts that as basis points start to rise, executives will be forced to address the impending customer concerns.

Europe is an interesting example because through the years you can actually see where fraud shifts and why. For example, back in 2008 the UK was being hit harder than any other country by far. After investing in fraud detection technologies, its fraud losses dropped 26% by 2013. However, since the UK has become a less desirable target, other countries are now bearing the brunt of the attacks. There were quite a few years where France saw very low levels of fraud loss while other countries suffered. As the targeted countries bolstered their defenses, France didn’t keep up technologically and hackers took notice. Because of this, fraud losses in France are up 70% since 2006.

Highest increases

Russia

Up 27.6%

The growth of fraud in Russia is exponentially higher than every other European country–365% higher than it was 2008. While this may initially look like Russia has simply become a major target, the real reason is card usage. As mentioned earlier, Russia has seen a high influx of credit card payments in general, so this large number is not necessarily representative of fraud patterns.

United Kingdom

Up 16%

Traditionally the biggest target of card fraud, the UK had a few good years after implementing their “tough on fraud” policies”. New technology managed to crack down on cyber criminals for a while, but since 2011 the UK has seen an increase in physical card theft. The UK is a great example of how fraud evolves when technology improves, and recently they’ve resulted to doing it the old fashioned way. If you can’t hack ‘em, pickpocket ‘em. As a response the UK has been working on better fraud detection while trying to balance customer service. The tougher the fraud detection, the more likely it is that legitimate transactions will be blocked, resulting in highly annoyed customers. One way they’ve been battling this potential issue is with real time communication about fraud alerts in order to minimize any potential inconveniences.

Norway

Up 7.8%

Out of all the Scandinavian countries, Norway is the biggest target for fraud. Similar to the UK, Norway saw a large dip following EMV, then an increase. Norway’s increase has been mostly focused on CNP fraud, up 39% in 2012, and physical card theft which has risen 6%.

Highest decreases

Netherlands

Down 10.7%

In staunch contrast to their neighbors to the north, the Netherlands has taken fantastic strides towards reducing credit card fraud–down 30% since 2008. They’ve managed to reduce counterfeit cards as well as CNP fraud, and physical theft is all but non-existent. Because of their success, FICO thinks it’s unlikely they’ll see a rise in fraud because other countries are an easier target.

Hungary

Down 6.5%

Fraud in Hungary plummeted after 2011, with 100x less fraud that Russia and card uses that is only 23x higher. Russia’s card usage is growing more quickly, but Hungary’s is still growing nonetheless. According to FICO this points to a potential for more fraud in Eastern Europe in the future.

Spain

Down 4.5%

Spain is an interesting example because while most other European countries’ fraud decreases are related primarily to counterfeit cards (remedied by EMV), Spain’s is mostly a decrease in physical card theft. Card issuers have begun using “rules based” detection, making it easy for them to quickly determine when a card is being used fraudulently. Examining other countries’ successes and failures in this area help us identify ways we can combat fraud and reduce chargebacks here in the United States.  Fraud is something we’re certainly keeping a keen eye on, and we’re eager to see how fraud rates are impacted by the upcoming transition to EMV.