Payment Fraud

. December 5, 2012

This past year, the Federal Reserve banks in Boston, Dallas, Minneapolis, and Richmond and the Independent Community Bankers of America surveyed financial institutions and others about payment fraud and their methods of combatting it.

Of those responding, 93% reported financial losses due to fraud but 69% estimated their losses at less than 0.3% of revenue.  About 85% of respondents stated that their fraud losses increased or stayed the same in 2012 as compared to 2011. Financial institutions reported counterfeit or stolen card use at the point of sale or online as the most common types of fraud involving their customers' accounts.

For most payment types, spending on fraud prevention exceeded actual losses except for (1) debit signature payments and (2) mobile payments.  The report points out that spending on fraud prevention in these two areas could reduce losses. When asked about 15 different internal controls and procedures to combat fraud, the report found that 12 were in widespread use, adopted by over 80% of financial institutions.