5 payment fraud statistics you need to know in 2022
As we enter 2022, imposter scams, fraud, scams, and other forms of identity theft continue to rise. As a business owner and merchant, it is essential to be aware of key credit card fraud statistics while also gaining some strategies to prevent fraud from taking place at your company. Learning about approaches to fraud and trends that are currently taking place can help protect your business and avoid the pitfalls of bank fraud, identity theft, and fraudulent transactions.
What is fraud and how does it happen?
Broadly speaking, fraud is the intentional use of deception for personal gain. In the context of credit card fraud, fraud is what happens when a person's account or personal payment information is misused for monetary or financial gain. Credit card fraud is considered the most prominent type of identity fraud and occurs when information associated with a credit card account is breached and stolen for the sake of making fraudulent transactions. Credit card fraud is the most prominent because the information tends to be the easiest to access and then replicate during the transaction process, particularly in the e-commerce space.
Within the realm of credit card fraud, there are various types of fraud that are used by fraudsters to complete scams, identity theft, and payment card fraud. Examples of types of credit card fraud include the following:
- Counterfeiting: With this method of fraud, scammers utilize existing credit card information and create a duplicate card for their use. The card and information may look very similar to the actual credit card and card data, however, there will be small differences that enable the fraudster to get away with a counterfeit means for payment.
- Card not present: Card not present (CNP) fraud is on the rise due to the increased use of digital payments and the growing reliance on e-commerce. CNP fraud occurs when financial data and information is used to make purchases without needing the card present. Credit card fraud statistics are demonstrating that this type of fraud has increased with more transactions occurring within online retail.
- Stolen card: Credit card fraud can frequently happen when a card is misplaced or when a card is stolen. Cardholders lose the ability to control what transactions are made and cases of identity theft can increase when someone else holds the actual card required for payment.
- Identity theft: On the flip side, if a hacker is able to gain your personal information, they can steal this data to make purchases or open new accounts. Most accounts associated with fraud are new accounts. Identity theft reports show that new account fraud is very common with most accounts associated with fraudulent activity having been created within 24 hours.
Recent scams and fraud trends
Newer types of fraud have been noted to be on the rise, especially following the start of the COVID-19 pandemic in 2020. Fraud trends show that hackers, scammers, and fraudsters are finding ways to steal information and financial data because of how business transactions have shifted on a global scale and how customers have an increased reliance on online payment systems.
Fraud reports are showing an increase in automatic push payments where fraudsters trick consumers into sending or transferring money into their account as well as synthetic identity fraud. Synthetic identity fraud is a growing financial crime and involves fraudsters gathering a variety of personal information to develop a completely fake and new identity. However, there is real data at risk when the personal information is authentic and belongs to actual people because even when compiled together with other data, it is still at risk for exposure and misuse. While this type of fraud is more difficult to detect, using additional security measures on your devices will make it more difficult for a hacker to gain access to essential personal information.
Another increasing trend is phishing, which is a tactic that is used to trick individuals into revealing personal or sensitive information through email. Sensitive information asked for can be passwords, usernames, or social security numbers for financial gain. Oftentimes, these emails are designed to appear to be coming from a known company or even the same company’s human resource department, when in fact they are actually disguised and coming from a fraudulent source. Employers should encourage employees to act with vigilance and report questionable emails that they receive to their management teams for further review and investigation.
Fraud prevention strategies
Before reviewing key credit card fraud statistics and credit card fraud facts, it is important to recognize and identify credit card fraud prevention strategies, particularly in light of the risk for data breaches and the increase in cybercriminals. The strategies outlined below are with the merchant in mind; these are steps that business owners can consider and implement at their place of business. The best approach to eliminate instances of fraud is to focus on prevention and eliminate possible vulnerabilities in the first place.
Recommendations for fraud and identity theft prevention as a merchant or business owner include:
2. As your business audits data that is stored, it may be helpful to also eliminate or reduce the amount of sensitive information kept. Seeking advice from your bank or payment processor on what data to keep or get rid of can help reduce the risk of access to sensitive information. Banks and payment processing companies can also support businesses in exploring other options for anti-fraud measures.
3. Confirm that your business is using hardware and software that meets industry security requirements. The Payment Card Industry (PCI) Council maintains and updates a list of providers and solutions that meet the highest level of security that can help your business prevent fraud. Referencing these security requirements can help your business make decisions about hardware and software that is utilized at your company as well as make informed decisions about the various tools used in your operations.
4. Examine the benefits of implementing tokenization and encryption as a means to protect customer account information whether tied to a credit card number, debit card number, or any other existing accounts. Tokenization is a technology innovation that replaces card numbers with randomized digits that cannot be tied back to the initial account number. Encryption involves taking original data or information and encoding it into a new sequence of information so that the original data is protected.
5. If your business operates in the e-commerce space, there are specific fraud prevention measures that help ensure the purchaser has possession of the card or payment method used in a given transaction. One tool that may be available for your business is the confirmation of the card verification value 2 (CVV2) upon payment. This additional security measure requires customers to input the code on the back of the card during the transaction. This helps prevent theft during CNP interactions or transactions that occur online or virtually. E-commerce merchants can also utilize address verification tools or 3-D secure where cardholders have to enter a personal password for identity confirmation. For businesses that have brick-and-mortar operations, utilizing EMV chip technology helps create sequences of data that are harder to capture and, ultimately, steal.
6. Consider utilizing validation tools during customer transactions and when requiring use of a payment method so that a customer's name, phone number, and address can be verified as accurate. Adding this extra layer of security helps prevent frequent fraud strategies, including debit card fraud, new credit fraud, and cybersecurity threats. Fraudsters may not have all pieces of customer information, and so this extra measure helps ensure that the person making the transaction is actually the identified customer.
7. If your business uses point of sale systems or any computer-based software, make sure your computer has antivirus software installed. Additionally, it may be useful to consider adding a firewall within your internet address for extra security and protection from cybercriminals. Keeping computer software systems up to date is a critical best practice for companies wanting to avoid cybercrime. Viruses, malware, and other issues with computer security have a high risk in leaving secure data vulnerable to acquisition.
8. Review business statements associated with your credit card number, credit report, and bank account. You will want to look out for any unusual transactions or unauthorized charges that show up. If any questionable transaction is identified, you should contact your credit card or bank's fraud department, potentially place a fraud alert on your account, and consider reporting instances of fraud and identity theft to the Federal Trade Commission (FTC). Completing regular audits of bank transactions will support efforts to catch any issues with unauthorized charges early on. If during an audit an issue with identity theft comes up, consider keeping a list of key resources to reach out to, including the Identity Theft Resource Center which is a non-profit company committed to minimizing risk and mitigating the impact of identity compromise.
1. 47% of Americans experienced financial identity theft in 2020. That is nearly half of all American consumers. While the range of identity theft can differ, this statistic demonstrates that avoiding identity theft is becoming more imperative as advanced strategies for fraud grow and expand. Of the Americans that experienced financial identity theft, it is noteworthy to point out that customers aged 35-44 were the group that had the highest cases of identity theft. It is often assumed that older generations are more likely to be a victim of a fraud or identity theft case. As this trend and statistic suggests, it is middle-aged adults who are the most recent target for identity theft. For business owners, this is helpful to keep in mind in terms of monitoring and storing their own information as well as employee information.
2. The United States makes up a third of global card fraud losses. When credit card fraud occurs, it is often the merchant that is responsible for covering any potential losses. As such, statistics show that the United States comprises a major portion of losses around the world. This tells us that the United States is a hot spot for credit card fraud – something that all businesses in the United States should be aware of moving into 2022. U.S.-based companies that have offices worldwide should be particularly vigilant, monitoring instances of fraud reports at every location.
3. In 2020, 2.2 million cases of fraud were reported to the FTC. 34% of these reports indicate that actual money was lost. So, while not every fraud report includes loss of money, many of them do. In some cases, it is easier to protect potential losses of assets. However, depending on the source and extent of the security threat, not all money lost can be recovered. Businesses should consider ways to protect their assets and install protections when interacting with their banking systems, including the process of initiating or completing wire transfers or money transfers.
4. Identity theft through credit card fraud is growing. Instances of identity theft by credit card fraud increased by 44.6% from 271,927 in 2019 to 393,207 in 2020. That is a huge jump, and so it is important to recognize that this increase of fraud activity may continue to grow in 2022. The takeaway from this statistic is that credit cards may be some of the easier methods for fraud. As such, when completing customer transactions with credit cards, including the most amount of security measures possible may benefit the safety of your customers and the protection of your company data.
5. Companies based in the United States have a high chance of becoming targets for payment fraud attacks. In 2019, 81% of companies in the United States reported some kind of targeting for fraud (even if it was unsuccessful for the hacker). This percentage (81%) is the highest it has been in over a decade. Because of this huge leap, U.S.-based companies should be coordinating security strategies and measures with their IT department, security team, or with a third-party consultant. Companies should consider having their existing IT systems audited to explore possible vulnerabilities, potential solutions, and gaps in security protection.
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