Credit card fraud increased last year despite heightened interest in reducing security risks, according to the 2014 AFP Payments Fraud and Control Survey, sponsored by J.P. Morgan. In response, companies appear to recognize this growing threat and are gearing up for the shift in credit/debit card liability from issuers to merchants.
Fully 63 percent of organizations said they either adopted additional security measures or are planning to do so in the near future, with measures ranging from secure signature stamps, electronic signatures, payment data stored with third-party vendors and increased layers of security.
“Criminals will try to stay a step ahead,” said Jim Kaitz, AFP's president and CEO. “But with potential liability increasing for merchants, companies are taking a hard look at where their own vulnerabilities lie. This is especially important for big companies with complex systems, which are frequent targets for fraud.”
Despite the increased measures, only 22 percent of companies that accept card payments anticipate a significant impact from their investment in card acceptance fraud prevention methods and half expect some impact.
Sixty percent of organizations were exposed to actual or attempted payments fraud in 2013, similar to 61 percent in 2012, but down from 68 percent in 2011. Fortunately, 70 percent experienced no financial loss as a result. Eighty percent of companies that experience fraud found that it originated outside the organization.
Fully 27 percent of respondents said they saw an increase in fraud in 2013, while 16 percent saw a decrease and 57 percent saw no change.
Although check fraud has declined, it still accounted for 82 percent of payment fraud incidents last year. Card fraud was a distant second at 43 percent, though it increased substantially from 29 percent in 2012. Next was ACH debit fraud at 22 percent, down from 27 percent in 2012; wire fraud at 14 percent, up from 11 percent; and ACH credit fraud at 9 percent, up from 8 percent.
“The fraud survey serves as such an important tool in understanding the potential risks within the payments industry and should not be underestimated,” said Nancy McDonnell, J.P. Morgan Commercial Banking Sales Executive. “Knowledge of current payments fraud practices and preventive measures helps companies implement the products and processes they need to protect their corporate assets.”
In January 2014, AFP surveyed over 5,600 corporate practitioners with the job titles of cash manager, analyst or director, resulting in 449 responses. This is the 10th year that AFP has conducted this survey. Download the survey results: www.afponline.org/fraud.