Credit and debit card fraud eating away at consumer confidence in providers

Cards sent to 'back of the wallet'

Credit and debit card fraud is starting to erode confidence in providers, with many consumers using cards less often or abandoning them altogether after fraud incidents, a global survey of 6,100 consumers by ACI Worldwide has reported.

Curiously, the firm's latest annual survey confirms that total card fraud rates (credit, debit and pre-paid) are now stable or falling in many countries, with 41 percent of US holders reporting that they had experienced it in the previous five years, a slight drop. In the UK, the fall has been even more marked, dropping from 34 percent in 2012 to 28 percent in 2014.

Global hotspots remain developing countries such as the UAE, China and India, recording fraud rates of 44 percent, 42 percent and 41 percent respectively.

Before anyone gets the idea that the UK is doing well, even these much improved rates compare pretty poorly to other Western European countries such as Germany on 16 percent and Sweden on 10 percent. Even traditional digital crime zone Russia is lower at 23 percent.

What does seem to be changing is how consumers view these fraud levels, and how this affects the way they use their cards.

In the US, cards replaced because of fraud - or worse still because of a data breach - are likely to be used less often than they were before an incident. Around in one in four say they used fraud-hit cards less often than before, presumably because of the fear of a repeat incident.

There is even a technical term for this behaviour - the 'back of wallet' relegation.

Although consumers in countries such as the US seem unlikely to lose confidence completely (US consumers are largely protected against fraud losses), around 12 percent believe that providers should be doing more.

In the UK, 14 percent of card users reported changing cards after experiencing fraud, with 36 percent using them less.

It's difficult to make too many generalisations on global attitudes to fraud incidents because culture, financial regulation and the level of fraud vary so widely. The study does suggest that consumers are growing more tired of fraud as an ingrained phenomenon, a trend exacerbated by the rise of online data breaches.

"Consumers are increasingly concerned about fraud, and are losing confidence on a variety of levels," said ACI Worldwide senior vice president, Mike Braatz. "They are unsure that their financial institutions can protect them against fraud; they use replacement cards less often due to a loss of confidence in the card or card issuer, after experiencing fraud; and post-fraud, they often change providers or their cards go to back of wallet.

ACI Worldwide's message is mainly for the card providers themselves; don't take consumers for granted. It is also a sign that after years of apparent indifference to fraud levels, growing consumer dissatisfaction could be a new pressure for the industry to invest in security.

In the US, card fraud levels should continue to drop as EMV (Europay, MasterCard and Visa) authentication technology is rolled out to meet standards achieved by most of the rest of the world many years ago.