Derek Wylde, Group Head of Fraud at HSBC, presented at the Financial Services Club last week.
He talked about many aspects of fraud and risk, and presented quite a few numbers related to the issue.
One of the charts raised questions in my mind. It related to the total cost of payment card fraud. According to Derek, payment card fraud costs an average of six to eight basis points on sales. For those who don’t use the terminology of basis points, a basis point is 1/100th of a point, or 0.01 if you prefer. So fraud costs between 0.06% to 0.08% of the total sales in payment cards.
Doesn’t sound like much does it.
Just eight basis points.
To put that in context however, a basis point of card sales is worth billions, so eight basis points is a pretty large amount.
You can now see why fraud is an issue, and Derek went on to discuss the main trends in the industry, which include:
- card fraud falling generally, although cardholder not present (CNP) attacks are rising;
- ATM attacks are on the rise;
- serious information risk issues and events are increasing;
- online fraud threats are ever present and are rising significantly; and
- internal fraud is always a worry.
Derek expanded on these points in depth, marking the success of Chip & PIN as a key component of the success in minimising fraud. He confidently expects the US to follow the example of the rest of the world therefore in eventually adopting Chip & PIN (although my sources say different).
With regard to ATM attacks, I was quite surprised that these are on the rise, with an increase in ATM fraud in Europe of 63% over the last year. My surprise is due to the fact that much of the card fraud related to ATM attacks I had heard about years ago, with crooks sticking webcams and wireless emitting devices into the frontage of ATMs to get card data and PIN shots of customers using these machines.
Apparently, such issues are still rife with card skimming, reversal fraud card and cash trapping increasing and, more recently, incidents of malware injection into ATMs to capture magnetic stripe data.
Derek went on to cover the whole gamut of mobile and internet fraud issues, with phishers and the rest still creating a sea of issues for the bank.
His summation is that the industry needs far more support from the technology community to minimise fraud in the future, and demanded real-time monitoring and analysis to enable the bank to capture the crooks. Real-time is key as you only get one chance to catch the criminals, never a second chance.
A sobering message and one that I also take to heart.
At the end, Derek put up a cartoon that I found particularly amusing for two reasons. One is that it’s very funny and the second is that it’s an Alex cartoon, and reminded me that we recently had Alex’s creators Charles Peattie and Russell Taylor speaking at the Financial Services Club. Therefore, for all of you who enjoy a good laugh, enjoy (doubleclick image to enlarge) …