Electronic Payments Fraud Growing, Fed Study Finds

A new Federal Reserve study found that between 2012 and 2015, the value of fraudulent electronic payments increased 37 percent, driven primarily by card fraud. During the same time period, the total value of electronic payments increased only 12 percent.

The data was collected as part of the Fed's surveys of depository institutions in 2012 and 2015, and payment card networks in 2015 and 2016. The study provides estimates of payments fraud totals and rates for payments processed over general-purpose credit and debit card networks.

The surveys found:

  • Card fraud, by value, accounted for more than three-fourths of noncash payments fraud in 2015, up from less than two-thirds in 2012;
  • Check fraud declined from $1.1 billion in 2012 to $710 million in 2015;
  • Fraudulent card payments and ATM withdrawals rose from $4 billion in 2012 to $6.5 billion in 2015; and
  • In-person card fraud decreased from $3.7 billion in 2015 to $2.9 billion in 2016 while remote card fraud grew from $3.4 billion to $4.6 billion.
  • Counterfeit card fraud declined from 2015 to 2016, attributed to the increased use of microchip cards.

Earlier this month, the Federal Reserve released a proposal relating to settlements or other services to address the future needs of a real-time retail payments environment.

CUNA and the state Leagues have been pressing Congress to enact legislation to subject retailers to the same data security standards required of credit unions and other card issuers under Graham-Leach-Bliley and hold them financially accountable for any breaches on their part. 

Credit union professionals, volunteers and members are encouraged to use the Take Action page of CUNA’s Stop the Data Breaches Web site to urge their representatives in Congress to pass comprehensive data security standards for all retail merchants.

The New Jersey Credit Union League is also actively pushing for passage of state legislation pending in Trenton that would limit the information retailers may retain after a sale has been completed, allow card issuers to tell their cardholders what entity was responsible for a breach, and hold that entity responsible for the cost of replacing cards as well as any associated fraud losses.