2016 Global Consumer Card Fraud: Where Card Fraud Is ... · 2016 Global Consumer Card Fraud: Where...

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2016GlobalConsumerCardFraud:WhereCardFraudIsComingFrom

JULY2016

BenKnieff

Researchsponsoredby:

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TABLEOFCONTENTSIMPACTPOINTS..............................................................................................................................................4INTRODUCTION..............................................................................................................................................5

METHODOLOGY........................................................................................................................................5GLOBALCARDFRAUDSNAPSHOT..................................................................................................................7FRAUDINTHEAMERICAS.............................................................................................................................15

RISKYBEHAVIOR.....................................................................................................................................15REPLACEMENTCARDS............................................................................................................................18CONSUMERATTITUDESTOWARDFRAUD..............................................................................................23

FRAUDINEUROPE,THEMIDDLEEAST,ANDAFRICA...................................................................................25RISKYBEHAVIOR.....................................................................................................................................25REPLACEMENTCARDS............................................................................................................................28CONSUMERATTITUDESTOWARDFRAUD..............................................................................................33

FRAUDINTHEASIA-PACIFIC.........................................................................................................................37RISKYBEHAVIOR.....................................................................................................................................37REPLACEMENTCARDS............................................................................................................................40CONSUMERATTITUDESTOWARDFRAUD..............................................................................................44

RECOMMENDATIONS...................................................................................................................................46RELATEDAITEGROUPRESEARCH.................................................................................................................47ABOUTAITEGROUP.....................................................................................................................................48

AUTHORINFORMATION.........................................................................................................................48CONTACT................................................................................................................................................48

LISTOFFIGURESFIGURE1:COUNTRIESSURVEYED..................................................................................................................6FIGURE2:CURRENTTOTALCARDFRAUDRATESBYCOUNTRY.....................................................................8FIGURE3:CURRENTCREDITCARDFRAUDRATES........................................................................................10FIGURE4:CURRENTDEBITCARDFRAUDRATES..........................................................................................12FIGURE5:MULTIPLEFRAUDINCIDENTS......................................................................................................13FIGURE6:CURRENTPREPAIDCARDFRAUDRATES.....................................................................................14FIGURE7:RISKYBEHAVIORINTHEAMERICAS............................................................................................16FIGURE8:RISKYBEHAVIORTRENDSINTHEAMERICAS...............................................................................17FIGURE9:RISKYBEHAVIORANDFRAUDEXPERIENCEDINTHEAMERICAS.................................................18FIGURE10:REPLACEMENTCARDSINTHEAMERICAS.................................................................................19FIGURE11:USEOFREPLACEMENTCARDSINTHEAMERICAS.....................................................................20FIGURE12:SATISFACTIONWITHFINANCIALINSTITUTIONAFTERFRAUDINTHEAMERICAS.....................21FIGURE13:SWITCHINGBEHAVIORINTHEAMERICAS................................................................................22FIGURE14:BACK-OF-WALLETBEHAVIORINTHEAMERICAS.......................................................................22FIGURE15:CONSUMERTRUSTINFINANCIALINSTITUTIONSINTHEAMERICAS........................................23

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FIGURE16:CONSUMERS’FRAUDCONCERNSINTHEAMERICAS................................................................24FIGURE17:RISKYBEHAVIORINEUROZONE................................................................................................25FIGURE18:RISKYBEHAVIORINEMEA(NON-EUROZONE)...........................................................................26FIGURE19:RISKYBEHAVIORANDFRAUDEXPERIENCEDINEUROZONE.....................................................27FIGURE20:RISKYBEHAVIORANDFRAUDEXPERIENCEDINEMEA(NON-EUROZONE)...............................28FIGURE21:REPLACEMENTCARDSINEUROZONE.......................................................................................29FIGURE22:REPLACEMENTCARDSINEMEA(NON-EUROZONE)..................................................................29FIGURE23:USEOFREPLACEMENTCARDSINEMEA....................................................................................30FIGURE24:SATISFACTIONWITHFINANCIALINSTITUTIONAFTERFRAUDINEUROZONE...........................31FIGURE25:SATISFACTIONWITHFINANCIALINSTITUTIONAFTERFRAUDINEMEA(NON-EUROZONE).....31FIGURE26:SWITCHINGBEHAVIORINEMEA...............................................................................................32FIGURE27:BACK-OF-WALLETBEHAVIORINEUROZONE.............................................................................33FIGURE28:BACK-OF-WALLETBEHAVIORINEMEA(NON-EUROZONE).......................................................33FIGURE29:CONSUMERS’TRUSTINFINANCIALINSTITUTIONSINEUROZONE............................................34FIGURE30:CONSUMERS’TRUSTINFINANCIALINSTITUTIONSINEMEA(NON-EUROZONE)......................34FIGURE31:CONSUMERS’FRAUDCONCERNSINEUROZONE......................................................................35FIGURE32:CONSUMERS’FRAUDCONCERNSINEMEA(NON-EUROZONE)................................................36FIGURE33:RISKYBEHAVIORINTHEASIA-PACIFIC......................................................................................38FIGURE34:RISKYBEHAVIORTRENDSINTHEASIA-PACIFIC.........................................................................39FIGURE35:RISKYBEHAVIORANDFRAUDEXPERIENCEDINTHEASIA-PACIFIC...........................................40FIGURE36:REPLACEMENTCARDSINTHEASIA-PACIFIC.............................................................................41FIGURE37:USEOFREPLACEMENTCARDSINTHEASIA-PACIFIC.................................................................41FIGURE38:SATISFACTIONWITHFINANCIALINSTITUTIONAFTERFRAUDINTHEASIA-PACIFIC.................42FIGURE39:SWITCHINGBEHAVIORINTHEASIA-PACIFIC............................................................................43FIGURE40:BACK-OF-WALLETBEHAVIORINTHEASIA-PACIFIC...................................................................43FIGURE41:CONSUMERS’TRUSTINFINANCIALINSTITUTIONSINTHEASIA-PACIFIC..................................44FIGURE42:CONSUMERS’FRAUDCONCERNSINTHEASIA-PACIFIC............................................................45

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IMPACTPOINTS• ThisImpactReport,basedonaQ22016ACIWorldwidestudyof6,035consumersin

20countries,providesanoverviewofrespondents’attitudestowardvarioustypesofcardfraudanddiscussestheactionstheymaytakesubsequenttoafraudexperience.Whereapplicable,italsocomparestheseresultswiththosefromsimilarACIsurveysin2012and2014.

• Ofallcardholders—debit,credit,andprepaid—30%haveexperiencedcardfraudinthepastfiveyears,asignificantportionofcardholders.

• Afterexperiencingfraud,40%ofconsumersusethereplacementcardless,atleastinsomesituations,thantheyusedthatcardpreviously.Thisback-of-walletbehaviorislostrevenueforthefinancialinstitution.

• In2016,17%ofdebitandcreditcardholderscitehavingexperiencedfraudmultipletimesduringthepastfiveyears,comparedto13%in2014.

• Consumerswhoaredissatisfiedwithhowtheyaretreatedbytheirfinancialinstitutionafterexperiencingfraudsometimeschangeproviders,resultinginaglobalattritionrateof20%.Thishighlightstheimportanceofaftercarefollowingafraudexperience.

• Fourteenpercentofglobalconsumerslackconfidencethattheirfinancialinstitutioncanprotectthemagainstfraud.Whilethisvariesfromregiontoregion,itdemonstratessomelevelofmisunderstandingaboutwhatstepsinstitutionstake.

• Fifty-fourpercentofglobalconsumersexhibitatleastoneriskybehavior,whichputsthemathigherriskoffinancialfraud.Educationaboutriskybehaviorsandwhatconsumerscandocanhelpreducefraudratesissorelyneeded—banksmustlearnhowtohelpconsumershelpthemselves.

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INTRODUCTIONWith2,260confirmeddatabreaches

1in2015aloneandover4billiondatarecordsstolensince

2013,2thesecurityofthefinancialservicesvaluechainisacriticaltopicwithintheindustryand

amongconsumers.Atthispointintime,theassumptionshouldbethatalmostallusers’credentialsand/orcardinformationhasbeencompromised.Theundergroundeconomyforuserinformationhasmaturedsomuchthatitisindistinguishablefromalegitimateeconomy.Therearevariousserviceproviders,service-levelagreements,andveryefficientsupply-demand-basedpricing.Itnolongerrequiressophisticatedcomputerscienceskillstoperpetratefraud,asmosteverythingrequiredcanbeacquiredofftheshelffromtheundergroundmarket.

ThisImpactReport,thefirstinatwo-partseriesonhowfinancialfraudaffectsconsumers,willlookatconsumerfraudexperiences,perceptionsoftrustinfinancialinstitutions,andriskyconsumerbehaviors.

3Thereportlooksat20differentcountriesfromtheAmericas;Europe,the

MiddleEast,andAfrica(EMEA);andtheAsia-Pacific.Therearesomebroadtrendsamongtheseregionsandthecountrieswithinthem,andtherearealsosomeinterestingoutliers.

METHODOLOGY ACIWorldwide,agloballeaderinelectronicpaymentsforfinancialinstitutions,retailers,andprocessors,conductedonlinequantitativemarketresearchinMarch2016andsurveyed6,035consumers.Thestudywasconductedinatotalof20countriesinthefollowingregions:

• TheAmericas(NorthandSouthAmerica):Brazil,Canada,Mexico,andtheUnitedStates

• EMEA:France,Germany,Hungary,Italy,theNetherlands,SouthAfrica,Spain,Sweden,theUnitedArabEmirates(UAE),andtheUnitedKingdom

• TheAsia-Pacific:Australia,India,Indonesia,NewZealand,Singapore,andThailand

China,Russia,andPolandwereremovedcomparedto2014,andSpain,Thailand,andHungarywereaddedfor2016(Figure1).

Thereweresomechangesinmethodologycomparedtothe2014reportthatleadstosomedifferenceswhencomparingthetworeports.The2014datawasreanalyzedin2016tomatchthesamemethodology,socomparisonsareapples-to-appleswithinthe2016report,butnotbetweenthe2014and2016reports.

1. Verizon,“2016DataBreachInvestigationsReport,”

http://www.verizonenterprise.com/resources/reports/rp_DBIR_2016_Report_en_xg.pdf,accessedMay22,2016.

2. “BreachLevelIndex,”http://breachlevelindex.com/#sthash.UU29yuUP.dpbs,accessedJune24,2016.

3. SeeAiteGroup’sreportGlobalConsumers:LosingConfidenceintheBattleAgainstFraud,June2014.

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Specifically,in2016theincidenceoffraudwascalculatedbasedthepopulationthatactuallyownedatypeofcard(credit,debit,prepaid),whereasin2014thecalculationwasbasedontheentirepopulation,irrespectiveofwhetherallindividualsownedtheparticulartypeofcard.

Figure1:CountriesSurveyed

Source:AiteGroupresearch

Intotal,6,159consumerswereincludedintheresearch:approximately300consumers,dividedequallybetweenmenandwomen,participatedineachofthe20countries.Ofthetotal,6,035ownoneormoretypeofpaymentcard—creditcard,debitcard,prepaidcard.ThisisthefourthtimethatACIhasfieldedthistypeofsurvey,andcomparativeresultsareincludedfrom2012and2014.

Ineachcountry,thedatahaveamarginoferrorofapproximately5points.Statisticaltestsofsignificance,whereshown,wereconductedatthe95%levelofconfidence.

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GLOBALCARDFRAUDSNAPSHOTCardfraudincludesunauthorizedactivityonthethreemaintypesofpaymentcards—debit,credit,andprepaid.Cardfraudcancomefrommanydifferentangles,includingdatabreaches,lost/stolencards,socialengineering,phishingattacks,andoftenacombinationofthese.Fraudratesaroundtheworldvarygreatlyindifferentregionsandcountries.

ComparedtothestudyfieldedinQ12014,theratesoffraudamongvariouscountrieshavemoved,andfraudratesareincreasinginmanycountries(Figure2).Inthe2016study,Mexicohasthehighestrateofcreditcardfraudat51%,followedbytheUnitedStatesat46%,andBrazilat46%(Figure3).

MexicohasexperiencedarockyroadinimplementingEMV,withchallengesbothontheissuerandmerchantsidesoftheequation.Badactorstakeadvantageofconfusionandimplementationweaknesses,whichdrivesthishighfraudrate.

IntheU.S.,fraudratesaredrivenbythefactthatitisawealthyeconomyandthatcardpaymentsarethego-topaymentmethodformostconsumers.CombinedwiththeprevalenceofonlineshoppingandslowadoptionofEMV,theU.S.isstillagoldmineforcriminals.Basedonothercountries’experiencewithEMVadoption,itisexpectedthatcard-not-present(CNP)fraudwillincreaseastheU.S.continuestomigratetoEMV.

Brazilhasitsownchallenges;withafalteringeconomyandafragmentedcardpaymentsenvironment,itisanattractivemarketforcriminals.Brazilisalsoalargemarketforonlineshopping,butmanye-commercefirmsdonothavestrongcontrolsforfraudprevention.Therearemanyopportunitiestoimproveonlinesecurity,suchas3-DSecure2.0andactivereal-timetransactionmonitoringthatcouldhelpreducefraudratesinBrazil’smarket.

Lookingtowardthefuture,mobilewallets,newpaymentstypesthatcloselyresemblecardpaymentsorevenusethecardnetworkrails,andmobilepaymentschemesoutsidethenetworks(suchasM-PesainKenya)willbeahigherpriority.Whiletherearenumerousnewpaymenttypes,particularlyindevelopingeconomies,cardsandcard-likepaymentswillcontinuetodominateconsumerpaymentsinmostgeographiesforquitesometime.

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Figure2:CurrentTotalCardFraudRatesbyCountry

Source:AiteGroup,ACIWorldwidestudiesofconsumersin20countries,Q22016andQ12014,andin17countries,Q32012

56%

49%

47%

40%

37%

36%

35%

33%

29%

29%

27%

27%

26%

26%

23%

20%

18%

14%

14%

9%

33%

30%

41%

31%

41%

28%

21%

30%

26%

28%

44%

20%

22%

16%

10%

13%

44%

33%

42%

31%

37%

26%

25%

25%

20%

34%

36%

24%

18%

13%

12%

12%

Mexico

Brazil

United States

Australia

India

Singapore

Canada

South Africa

France

United Kingdom

Dubai (UAE)

Italy

Spain

Indonesia

Thailand

New Zealand

Germany

Sweden

The Netherlands

Hungary

Percentage of Respondents Who Have Experienced Card Fraud in the Last 5 Years, 2012 to 2016

2016 (n=5,861)

2014 (n=5,174)

2012 (n=4,813)

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Creditcardfraudratesinthe2016studyshowthatconsumersaroundtheworldstillexperiencecardfraud,despitetheimplementationoffraudanalyticssolutionsandEMVinmanycountries.Thereisnoshortageofwayscriminalscantakeadvantageofcarddatatoperpetratefraud.

TheU.S.lagsinEMVimplementationcomparedtomostoftherestoftheworld,thoughthereissomeprogress.

4Solongastherearecountriesthatdonotacceptchipcardsfully,therewillstill

becardswithmagneticstripes,fortravelersiffornothingelse.Thismeansskimminganddatabreacheswillcontinuetobeachallenge,andCNPfraudwillcontinuetobeachallengeirrespectiveofEMVmigrations,barringsomeunforeseeninnovations.

Insomecountries,thereareindicatorsthatnotonlydoesCNPfraudincreasefollowingEMVrolloutbutalsoapplicationfraud.Whileapplicationfraudhasexistedsincebanksbeganopeningaccounts,itiseveneasiernowduetothebreadthofpersonalinformationavailablefrombreachesaswellasthehugeamountsofinformationpublishedbyconsumersonsiteslikeFacebook,LinkedIn,Instagram,andmanyothers.Thiswealthofdatahaseffectivelyrenderedknowledge-basedauthentication(KBA)uselessforauthenticationandmakesapplicationfraudsomucheasier.

4. SeeAiteGroup’sreportEMV:IssuanceTrajectoryandImpactonAccountTakeoverandCNP,May

2016.

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Figure3:CurrentCreditCardFraudRates

Source:AiteGroup,ACIWorldwidestudiesofconsumersin20countries,Q22016andQ12014,andin17countries,Q32012

TheimplementationofEMVwillalsocurtailcounterfeitfraudondebitcards.Issuersaregenerallyfocusedonissuingchipcardstotheirmostactiveusersaswellasonregularexpiry.

51%

46%

46%

37%

35%

32%

30%

28%

28%

28%

25%

25%

24%

24%

20%

18%

17%

12%

12%

8%

29%

37%

28%

28%

27%

19%

35%

26%

26%

14%

26%

17%

40%

15%

15%

8%

11%

38%

39%

31%

30%

24%

20%

29%

20%

19%

16%

31%

22%

33%

10%

11%

8%

Mexico

United States

Brazil

Australia

Singapore

Canada

India

South Africa

France

Spain

Indonesia

United Kingdom

Italy

Dubai (UAE)

Thailand

New Zealand

Germany

Sweden

The Netherlands

Hungary

Q. Have you experienced fraud on your credit card in the past 5 years?

2016 (n=5,861)

2014 (n=5,174)

2012 (n=4,813)

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Smallerinstitutionsoftenneedtogetinaqueuewiththeircardprocessorstoissuechipcards.Someinstitutionsgotinthisqueueearly,butforthosetowardthebackofthequeue,itmaytakesometime,andtheinstitutionwillhavetocarrytheliabilitywhencardsareusedatchip-enabledpoint-of-sale(POS)terminals.

Whilesomeofthecountriessurveyedhavechanged,itisclearthatMexico,India,Brazil,andtheU.S.generallyhavesomeofthehighestcardfraudrates.Inthe2016study,cardholdersinMexicoexperiencethehighestrateofdebitcardfraudat34%,followedbyBrazil(25%),India(23%),andFrance(22%).TheU.S.closelytrailsFranceat21%.Inthe2014study,cardholdersinChinaexperiencedthehighestrateofdebitcardfraudat30%,followedbyIndia(24%),Mexico(21%),andtheUnitedStates(20%;Figure4).Mexico,Brazil,andFranceexperiencedratherdramaticincreasesindebitcardfraudin2016comparedto2014.

Itisnotablethatthecountrieswithhigherdebitcardusageratesrelativetocreditcardusagerates(e.g.,Sweden,theNetherlands,Germany)alsohaverelativelylowdebitcardfraudrates,inpartbecauseoftheextensiveandeffectiveimplementationofEMV,andalternativepaymentoptions(e.g.,ELVinGermany,Proton,andotherelectronicpurseoptions).

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Figure4:CurrentDebitCardFraudRates

Source:AiteGroup,ACIWorldwidestudiesofconsumersin20countries,Q22016andQ12014;andin17countries,Q32012

Aratherlargenumberofconsumersexperienceddebitand/orcreditcardfraudonmorethanoneoccasioninthelastfiveyears.Seventeenpercentofglobalconsumersexperienceddebitor

34%

25%

23%

22%

21%

19%

17%

17%

17%

17%

15%

15%

13%

13%

13%

13%

10%

8%

7%

6%

21%

13%

24%

15%

20%

16%

15%

7%

11%

11%

14%

10%

10%

9%

5%

8%

7%

26%

17%

21%

13%

22%

12%

17%

13%

9%

13%

11%

11%

9%

11%

9%

7%

Mexico

Brazil

India

France

United States

South Africa

Spain

United Kingdom

Canada

Australia

Singapore

Dubai (UAE)

Italy

Indonesia

Thailand

Sweden

New Zealand

The Netherlands

Germany

Hungary

Q. Have you experienced fraud on your debit card in the past 5 years?

2016 (n=5,861)

2014 (n=5,174)

2012 (n=4,813)

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creditcardfraudmorethanonceinthepastfiveyears,astatisticallysignificantincreasefrom2014and2012surveys(Figure5).Thewealthofstolenpaymentdetailsavailablethroughdatabreachesandphishingscamsmeanseveryoneisatargetandcanexperiencemultipleincidencesoffraudwithdifferentcards.Ascriminalstrytomaximizetheirtakefromasinglecard,fraudcanalsooccurmultipletimesforasinglecard.

Figure5:MultipleFraudIncidents

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Prepaidcardsarerelativelynewcomparedtocreditanddebitbutareincreasinglybeingusedforpublicbenefits,payroll,andasanalternativetoatraditionalcheckingorcurrentaccount.Prepaidcardusageandfraudratesvarywidelyacrossthecountriesrepresented.ThehighestrateoffraudonprepaidcardsisexperiencedbyconsumersinIndiaandBrazilat18%,followedbyMexicoat14%,thenItalyandIndonesiaat13%.France,Thailand,andSpainareequallycloseandwithinthemarginforerror.Consumersinmanyothercountriesexperiencelowfraudrates(Figure6).

Itislikelythatoverallusageratescorrelatetothesenumbers.Forexample,inIndiamanygovernmentemployeesarepaidviareloadableprepaidcards,andmanygovernmentbenefitsaredistributedthroughgovernmentprepaidcards.Anotherpotentialfactorinthelowerfraudratesisthatfewprepaidcardsareusedforaverylongtimeorcarryhighbalances;thus,theyarenotonlyamovingtargetforfraudstersbutalsoalower-valueone.Consumersmayalsonotdifferentiatebetweenopen-andclosed-loopcards,whichhavevaryinglevelsofvaluetocriminals.

13% 13%17%

2012 (n=4,813) 2014 (n=4,866) 2016 (n=4,699)

Q. Have you experienced more than 1 incident of debit or credit card fraud in the past 5 years?

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Figure6:CurrentPrepaidCardFraudRates

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016andQ12014;and17countriesinQ32012

18%

18%

14%

13%

13%

12%

12%

11%

9%

7%

7%

7%

5%

5%

4%

4%

4%

4%

4%

2%

20%

8%

8%

11%

12%

5%

11%

12%

6%

3%

3%

2%

2%

5%

3%

4%

3%

23%

9%

12%

10%

5%

4%

8%

8%

2%

3%

3%

3%

6%

4%

6%

2%

India

Brazil

Mexico

Italy

Indonesia

France

Thailand

Spain

Dubai (UAE)

Singapore

Australia

United Kingdom

Sweden

Canada

New Zealand

United States

Hungary

Germany

South Africa

The Netherlands

Q. Have you experienced fraud on your prepaid card in the past 5 years?

2016 (n=5,861)

2014 (n=5,174)

2012 (n=4,813)

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FRAUDINTHEAMERICASThissectionofthereportexaminesconsumerbehaviorsrelatedtofinancialfraudintheAmericas.ThereisalotofvarietyintheAmericas;theU.S.andCanadahavequitematurecardpaymentsenvironments,whilemarketsincountriessuchasMexicoandBrazilaremorenascent.Thisisreflectedinthefraudrates:TheU.S.andCanadahavematurecontrols,butothergeographies,despiteleveragingEMV,facehighratesoffraud.

R I SKY BEHAV IOR Consumerbehaviorhassomeimpactonwhethersomeonebecomesavictim.Incasessuchasadatabreachorskimming,theconsumerhaslittlecontrol,butconsumerscanhelptopreventphishing,lost/stolencards,andfriendlyfraud.Riskybehaviorssuchaskeepingone’sPINwiththecardhaveadirectcorrelationtoexperiencingfraud.Itisimportanttoeducatecustomers,butfinancialinstitutionsneedtoavoidcausingmentalfatiguethatwillleadtousersignoringthosemessages.

Thereisalwaysabalancebetweenusabilityandsecurity,andifsecuritybecomestooonerousfortheusers,theyfindawayaroundit(suchaswritingdownPINsorpasswords).Toohighofabarrieractuallymotivatesuserstoengageinriskybehaviors.Morefirmsarelookingforwaystoimprovecustomerexperienceandsecurityatthesametime.Passivebiometricsandmoreintelligentmonitoringtoolsaretwoexamplesoftechniquesusedtoimprovesecuritywhileavoidingnegativeuserimpact.Asmobilebankingandcardpaymentsgrowinadoption,therearenewriskswithuserssecuring,orfailingtosecure,theirdevices.

Thesurveyquestionedconsumersonwhethertheyhadengagedinfivedifferentriskybehaviorsinthelastfiveyears(Figure7).Therearecertainlyadditionalriskybehaviors,andtherewillbenewonesastechnologyevolves.

ConsumersinBrazilexhibitthemostriskybehaviors.Overaquarter(27%)statetheyleavesmartphonesunlockedwhennotinuse,and23%leavepersonalinformationinthetrashbin.Mexicoisnotfarbehindintherangeofriskybehaviors.ThereisastrongcontrastbetweenthefraudratesandbehaviorsintheU.S.andCanadacomparedtoBrazilandMexico;U.S.andCanadianconsumersexhibitmorecautionthattheirsoutherncounterparts(Figure7).

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Figure7:RiskyBehaviorintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Forcardfraudtodecrease,consumersmustplayarole,andlimitingriskybehaviorisonewayconsumerscanhelpprotectthemselves.Riskybehaviorsaregenerallyrising,muchofwhichcanbeattributedtotheincreaseinunsafesmartphoneusage(Figure8).Financialinstitutionscanbenefitbyfurthereducatingcustomersonbestpracticestokeepthemsecure.Additionaleducationcanbeavaluablecustomertouchpointandcansupportafinancialinstitution’sbrandasatrustworthypartner.

20%

18%

14%

9%

8%

20%

23%

18%

12%

10%

15%

16%

10%

7%

5%

27%

23%

22%

15%

11%

Left smartphone unlockedwhen not using it

Thrown papers ordocuments with account

numbers (e.g., bankstatements) in the trash

bin

Used online banking orinternet shopping withoutsecurity software or on a

public computer

Made a note of your PINand carried it with you or

kept it with your card

Responded to emails orcalls asking for bank

details

Q. Which of the following have you done in the past 5 years?

UnitedStatesMexico

Canada

Brazil

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Figure8:RiskyBehaviorTrendsintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016andQ12014

Itisclearthat,ingeneral,consumerswhoavoidriskybehaviorsarelesslikelytoexperiencefraud(Figure9).Thispointstoeducationasakeycomponenttopreventingfraudattheuser-behaviorlevel.Themoreeducatedconsumersareaboutriskybehaviors,themorelikelytheyaretoavoidthosebehaviors.

33%20% 21% 27%

11%20% 12% 15%

27%

23%30% 23%

13%

18%

12%16%

20%

18%22% 22%

7%

14%

5%10%

9%

12%

12% 15%

6%

9%

6%

7%

6%

10%

7% 11%

5%

8%

5%

2014(n=307)

2016(n=303)

2014(n=300)

2016(n=300)

2014(n=311)

2016(n=300)

2014(n=304)

2016(n=303)

Mexico Brazil United States Canada

Risky Behavior Trends Over 2014 and 2016

Responded to emails or calls asking for bank detailsMade a note of your PIN and carried it with you or kept it with your cardUsed online banking or internet shopping without security software or on a public computerThrown papers or documents with account numbers (e.g., bank statements) in the trash binLeft smartphone unlocked when not using it

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Figure9:RiskyBehaviorandFraudExperiencedintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

R EPLACEMENT CARDS Databreacheshavebecomederigueur,andissuersandmerchantscansafelyassumethatpaymentcarddetailsaswellasotherinformation,suchasPINs,emails,andaddresses,foranygivencustomerhavebeenbreached.Asaresultofsomebreaches,somecardissuersmailreplacementcardstotheircardholderseveniftherehasnotyetbeenfraudontheaccount,thoughmanyissuerstrytolimitcardreissuanceandpreferenhancedmonitoring.Thisreducescostsfortheissuersandinconvenienceforconsumers.

IntheAmericas,approximately53%ofAmericansreceivedareplacementcardduringthepastyear,alongwith46%ofMexicans,30%ofCanadians,and45%ofBrazilians.Giventhehugenumberofdatabreachesimpactingmanyretailers,itcanbedifficulttoidentifythesourceofthedatabreachandtracethefraudtoanygivenentity(Figure10).Itshouldbenotedthatconsumersmaynotrealizeexactlywhytheyhavereceivedanewcard.Sothereisapossibilitythatacardwasreissuedforfraudorpotentialfraudthattheconsumerwasn’tawareof;itisalsopossiblethatcardswerereissuedingeneralrotationorforEMVimplementation,buttheconsumercouldhavethoughtitwasfraud.

73%

51%

64%

42%

58%

46%

47%

40%

27%

49%

36%

58%

43%

54%

53%

60%

Did not engage inrisky behavior (n=180)

Engaged in risky behavior (n=117)

Did not engage inrisky behavior (n=106)

Engaged in risky behavior (n=171)

Did not engage inrisky behavior (n=160)

Engaged in risky behavior (n=133)

Did not engage inrisky behavior (n=124)

Engaged in risky behavior (n=154)

Can

ada

Braz

ilU

nite

d St

ates

Mex

ico

Fraud Experienced by Respondents Who Did and Did Not Participate in Risky Behavior in the Americas

Have not experienced card fraud Have experienced card fraud

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Figure10:ReplacementCardsintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

InMexico,replacementcardsarefarmorelikelytogotobackofwallet(getusedlessoften),with57%ofrespondentsmovingthecardbackwardinthewallet.Thereisacleardifferenceinwallet-positionbehaviorbetweentheU.S.andCanada,whichshowlowernumberschangingcards,andMexicoandBrazil,whichshowmuchhigherratesofdowngradingacard.Thismaybeduetogreaterstickinessassociatedwithcustomerloyaltyprogramsandmultipleproductrelationships(Figure11).

47%

54%

55%

70%

40%

36%

35%

24%

10%

8%

6%

5%

United States(n=293)

Mexico (n=278)

Brazil (n=277)

Canada (n=297)

Q. Has your financial institution sent a new debit, credit, or prepaid card to you during the past year because of a data breach or fraudulent

activity?

No Yes, once Yes, twice Yes, 3 times Yes, more than 3 times

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Figure11:UseofReplacementCardsintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Becomingavictimoffraudcanfeeljustasviolatingasahomeburglary,understandablyleavingconsumersemotional,confused,andasking“whydidthishappentome?”Consideringthisemotionalstate,financialinstitutionsmustfocusoncustomerservicetocalmcustomersandhelpthemthroughtherequiredpost-fraud“aftercare”process.Apositiveaftercareexperienceisahugecustomer-retentionopportunityandhelpsrebuildconfidencewithconsumers.Thisisespeciallycriticalsinceitiseasyforfraudspecialiststobecomeratherjaded,anditshouldbereinforcedasapartofregulartraining—thoseagentsmighthavetoactasmuchlikecounselorsascustomerserviceagents.

IntheAmericas,consumersintheU.S.arethemostpleasedwithtreatmentfromtheirinstitutionafterexperiencingfraud;90%ofconsumersaresomewhathappyorveryhappywiththetreatmenttheyexperienced.SecondisCanada,where81%ofconsumersareatleastsomewhathappywiththeirtreatment.Therehavebeensomeimprovementscomparedto2014withconsumersinMexicoandBrazil;80%inMexicoareatleastsomewhathappywiththeinstitution,and65%arethesameinBrazil(Figure12).Thereisplentyofopportunitytoimprove,especiallyinLatinAmerica,whereconsumerexperiencemarksarenotverystrong.

57%

42%

25%18%

Mexico (n=127) Brazil (n=125) Canada (n=88) United States (n=154)

Percentage of Respondents in the Americas Who Use Their Replacement Card Less as a Result of Fraud or a Breach

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Figure12:SatisfactionWithFinancialInstitutionAfterFraudintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Consumerswhoexperiencefraudandaredissatisfiedwiththeaftercareexperiencesometimeschangeproviders.CustomerdissatisfactionratesinMexicoandBrazilarerelativelyhigh,soitisnotsurprisingthat23%and18%ofconsumersinthoserespectivecountrieschangeprovidersafterafraudexperience.Thisisanimprovementover2014,when33%ofconsumersinBraziland21%ofconsumersinMexicoweredissatisfied.

IntheUnitedStates,6%ofconsumersswitchproviders,andinCanada,11%doso(Figure13).Thisisashiftfrom2014,whentheU.S.switchingratewas9%andtheCanadaswitchingratewas6%.TheratherlowU.S.andCanadianconsumerswitchingratescouldbeduetoparticularlystickyrelationshipswithfinancialinstitutions.Consumersmayhavemultipleproducts,suchasahomemortgage,401(k),orautoloan,withthesameinstitution,andcardloyaltyprogramsincentthemtoremainwiththeinstitutioneveniftheywerenotparticularlyhappywiththeaftercareexperience.

7%

9%

13%

9%

12%

11%

22%

31%

39%

43%

34%

59%

42%

37%

31%

United States(n=140)

Canada (n=105)

Mexico (n=159)

Brazil (n=137)

Q. How happy were you with the treatment from your financial institution when you experienced card fraud?

Very unhappy Somewhat unhappy Somewhat happy Very happy

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Figure13:SwitchingBehaviorintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Switchinginstitutionshasasignificantcostforconsumers,andsomemaychoosetouseadifferentcard(i.e.,front-of-walletcard)orusecashiftheirtrustdiminishesafterafraudeventratherthanchangefinancialinstitutionsoutright.Broadly,intheU.S.andCanada,consumersdonotexhibitastrongpreferenceforusinganalternatepaymentmethodfollowingafraudevent(Figure14).InBrazilandMexico,overhalfofconsumersreportatleastsomeback-of-walletbehavior.

Figure14:Back-of-WalletBehaviorintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

77%

82%

89%

94%

23%

18%

11%

6%

Mexico (n=159)

Brazil (n=137)

Canada (n=105)

United States(n=140)

Q. As a result of your experience with fraud, did you change your financial institution or credit card company?

No, I did not Yes, I did

4%

3%

3%

2%

31%

46%

56%

69%

51%

40%

33%

24%

14%

11%

8%

6%

Mexico (n=159)

Brazil (n=137)

Canada (n=105)

United States(n=140)

Q. When you experienced fraud, did you choose to use cash or an alternative payment method over a credit or debit card following the

card fraud incident?

Used cash instead ofmy debit card, but notinstead of my credit card

No Yes, but onlyin some situations

Yes, in allsituations

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CONSUMER ATT ITUDES TOWARD FRAUD Fraudandsecurityhavebecomeamass-markettopic—storiesofcomputerhackers,malware,databreaches,fraudrings,andvictimsofidentitytheftareconstantlyinlocalandnationalnewsmedia.Itisunderstandablethatconsumersmightbeconcerned,especiallyasinstitutionsdon’twanttoshareallthecountermeasuresandcontrolstheyareusingtoavoidprovidingthecriminalsaniceplaybookfromwhichtowork.

IntheAmericas,consumersdonothaveabsoluteconfidencethattheirfinancialinstitutionscanprotectthem,butthemajoritybelievefinancialinstitutionsareatleastdoingthebesttheycan(Figure15).SomeinstitutionsintheAmericashavehighlightedsecurityinmarketingandbrandingmaterials,andappeartoseeapositiveeffectbycommunicatingtocustomerstheircommitmenttosecurity.

Figure15:ConsumerTrustinFinancialInstitutionsintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Inthecountrieswherefraudratesarehighest,consumersexpresshigherdegreesofconcern.Thisisonlylogicalgiventhatfraudexperiences,especiallymultipleexperiences,generallyleadtodiminishedtrust.

TheUnitedStatesisalargetargetwithrelativelyhighratesoffraud,yetconsumersexpresslessconcern,sinceU.S.consumersareprotectedbyfederalregulations(suchasRegulationE)andpaymentnetworkpoliciesthatrequirefinancialinstitutionstoreimbursethemwhentheyarevictimizedbyelectronicfraud.ConsumersinMexicoandBrazil,withhigherfraudratesandlessregulatorystructure,aremoreconcernedabouteverycategoryoffraudcomparedtoconsumersintheUnitedStatesandCanada.InBrazilandMexico,consumersaremostconcernedaboutidentitytheftandfraudontheirdebitcards.IntheUnitedStatesandCanada,consumersaremostconcernedaboutidentitytheft,databreachesthatresultincompromisedaccountnumbers,andfraudontheircreditcards(Figure16).

4%

8%

8%

13%

12%

67%

69%

60%

55%

24%

21%

26%

30%

United States(n=293)

Canada (n=297)

Brazil (n=277)

Mexico (n=278)

Q. Do you have confidence in your financial institution to protect you from card fraud?

No, I have verylittle confidencethey can

Not really,they coulddo more

Yes, to an extent,they're doingwhat they can

Yes,absoluteconfidence

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Ingeneral,strongconsumerprotectionsintheU.S.andCanadaappeartoreduceconsumers’concernoverfraudeventsbutcertainlydonotalleviateallconcerns.Theseregulationsandpoliciesalsocreateamoralhazard,sinceconsumershavelessofareasontoavoidriskybehaviors.

Figure16:Consumers’FraudConcernsintheAmericas

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

51%

50%

39%

36%

35%

28%

21%

31%

10%

83%

78%

77%

70%

76%

68%

60%

48%

39%

55%

48%

48%

41%

39%

33%

21%

33%

12%

74%

77%

73%

67%

62%

58%

55%

44%

40%

Identity theft

Data breach resulting in compromisedaccount numbers

Fraud on my credit card

Online banking fraud

Fraud on my debit card

Direct debit fraud (auto payment fromaccount)

Cheque/check fraud

Mobile wallets, or electronic purses suchas using PayPal on a phone, or using

Apple Pay, Google Pay, or making in-apppurchases

Fraud on my prepaid card

Percentage of Consumer Who Are Very Concerned About Fraud Types in the Americas

United States(n=300)Mexico (n=303)

Canada (n=303)

Brazil (n=300)

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FRAUDINEUROPE,THEMIDDLEEAST, ANDAFRICAManycountriesinEMEAhavewell-developedbankingsystems.Somehaveemergingeconomies,withconsumersgainingnewaccesstomanybankingproductsinrelativelyrecentyears.Manyoftheseeconomiesareskippingcardsforthemostpart(mostlyusedbythewealthyandtourists)andareleveragingalternative,frequentlymobile-basedpaymentoptions.Itissomewhatdifficulttocomparefinancialfraudacrosssuchdiverseeconomies,andthisreportbreaksouteurozonemembersfromtherestofEMEAtobettercomparetheregions.

R I SKY BEHAV IOR SimilartoconsumersintheAmericas,consumersinsurveyedEMEAcountriesarelargelyeducatedtoignoreemailsandcallsrequestingdetailsabouttheirbankaccounts,althoughconsumersintheUAEandSouthAfricarespondmorefrequently(Figure18).Likewise,consumersinmostcountriesnolongermakeanoteoftheirPINandcarryitwiththeircards;however,ItalianandUAEconsumerswritedowntheirPINsat19%and25%,respectively(Figure17andFigure18).Thisisaseriousflawinconsumereducationandapracticethatshouldbeaddressed.TheUAEhasparticularlyhighfiguresofriskybehaviors,whichlikelycontributetohigherfraudrates.

Figure17:RiskyBehaviorinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

25%

16%

8%

3%

4%

15%

12%

12%

10%

4%

13%

14%

18%

19%

5%

21%

22%

8%

4%

3%

29%

26%

20%

9%

4%

Left smartphone unlockedwhen not using it

Thrown papers ordocuments with account

numbers (e.g., bankstatements) in the trash

bin

Used online banking orinternet shopping withoutsecurity software or on a

public computer

Made a note of your PINand carried it with you or

kept it with your card

Responded to emails orcalls asking for bank

details

Q. Which of the following have you done in the past 5 years?

France (n=304)

Germany (n=301)

Italy (n=304)

The Netherlands(n=300)Spain (n=303)

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Figure18:RiskyBehaviorinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Overall,thereisstillplentyofriskybehaviorinallgeographies,andthesebehaviorscertainlyhavesomeimpactontheleveloffraud.Ineverycountrytherearehigherincidencesoffraudwhenconsumersparticipateinriskybehavior(Figure19andFigure20).Themagnitudeofdifferencebetweenriskyandnonriskyconsumersisquitesubstantial,andchangingthosebehaviorscanhavearealimpactonfraud.Consumereducationandwell-timedreminderscanslowlybutsurelyreducetheseriskybehaviors.

19%

16%

7%

8%

4%

27%

25%

26%

25%

19%

22%

30%

14%

7%

3%

28%

24%

18%

10%

10%

16%

13%

9%

8%

5%

Left smartphone unlockedwhen not using it

Thrown papers ordocuments with account

numbers (e.g., bankstatements) in the trash

bin

Used online banking orinternet shopping withoutsecurity software or on a

public computer

Made a note of your PINand carried it with you or

kept it with your card

Responded to emails orcalls asking for bank

details

Q. Which of the following have you done in the past 5 years?

United Kingdom

UAE (n=300)

Sweden (n=302)

South Africa(n=303)Hungary (n=303)

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Figure19:RiskyBehaviorandFraudExperiencedinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

77%

61%

84%

62%

84%

65%

87%

75%

92%

78%

23%

39%

16%

38%

16%

35%

13%

25%

8%

22%

Did not engage in risky behavior (n=162)

Engaged in riskybehavior (n=127)

Did not engage in risky behavior (n=149)

Engaged in riskybehavior (n=145)

Did not engage in risky behavior (n=122)

Engaged in riskybehavior (n=168)

Did not engage in risky behavior (n=175)

Engaged in riskybehavior (n=121)

Did not engage in risky behavior (n=172)

Engaged in riskybehavior (n=125)

Fran

ceIta

lySp

ain

Ger

man

yTh

eN

ethe

rland

s

Fraud Experienced by Respondents Who Did and Did Not Participate in Risky Behavior in the EMEA

Have not experienced card fraud Have experienced card fraud

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Figure20:RiskyBehaviorandFraudExperiencedinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

R EPLACEMENT CARDS AcrossalltheEMEAcountriessurveyed,therateatwhichconsumersreceivedareplacementcardduetofraudordatabreachesduringthepastyearrangesfrom10%inHungary(wherefraudislow)to29%intheUAE(oneofthecountrieswiththehighestfraudratesinthestudy).Asmallbutsubstantialnumberofconsumersreceivedmorethanonereplacementcardduringthepastyear(Figure21andFigure22).

71%

64%

73%

67%

86%

69%

90%

82%

92%

88%

29%

36%

27%

33%

14%

31%

10%

18%

8%

12%

Did not engage in risky behavior (n=133)

Engaged in riskybehavior (n=162)

Did not engage in risky behavior (n=183)

Engaged in riskybehavior (n=112)

Did not engage in risky behavior (n=66)

Engaged in riskybehavior (n=213)

Did not engage in risky behavior (n=139)

Engaged in riskybehavior (n=157)

Did not engage in risky behavior (n=171)

Engaged in riskybehavior (n=133)

Sout

h Af

rica

Uni

ted

King

dom

UAE

Swed

enH

unga

ryFraud Experienced by Respondents Who Did and Did Not Participate in Risky

Behavior in the EMEA

Have not experienced card fraud Have experienced card fraud

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Figure21:ReplacementCardsinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Figure22:ReplacementCardsinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Replacementcardsarenotabadthinginandofthemselves.Someconsumersappreciateaproactiveapproachfollowingadatabreachoridentifiedskimmingincident.Othersmayfindthisannoyingiftheyneedtoupdaterecurringbillinginformation.Itisverycriticalthatinstitutionsprovideveryclearinformationincasesofbreachorskimmingevents.Manyissuersareoptingtomorecloselymonitoraccountsthatmaybeinvolvedinabreachorskimmingeventratherthanreissuecards.Thiscanreducecostsforissuersandreduceinconvenienceforconsumers.

76%

78%

78%

83%

88%

21%

18%

19%

15%

9%

Spain (n=290)

France (n=289)

Germany (n=296)

Italy (n=294)

The Netherlands(n=297)

Q. Has your financial institution sent a new debit, credit, or prepaid card to you during the past year because of a data breach or fraudulent

activity?

No Yes, once Yes, twice Yes, 3 times

71%

78%

81%

87%

90%

22%

20%

15%

11%

8%

5%UAE (n=279)

United Kingdom(n=295)

South Africa(n=295)

Sweden (n=296)

Hungary (n=284)

Q. Has your financial institution sent a new debit, credit, or prepaid card to you during the past year because of a data breach or fraudulent

activity?

No Yes, once Yes, twice Yes, 3 times

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AcrosstheEMEAcountries,consumersusereplacementcardslessthanthecardstheyreplacedatratesrangingfrom25%inGermanyto51%intheUAE.Thesehighratesofback-of-walletbehaviorreducecardissuers’revenueanddemonstratediminishingtrustinthecardsorfinancialinstitutionsinvolved(Figure23).

Figure23:UseofReplacementCardsinEMEA

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Afterexperiencingfraud,atleast50%ofconsumerswereatleastsomewhathappyacrossalleightcountriessurveyed.FranceandtheU.K.sawsomeofthemostsatisfiedconsumers,with80%atleastsomewhatsatisfiedinbothcountries.Others,suchasSpain,Italy,Hungary,SouthAfrica,andtheUAE,hadsignificantpopulationsthatwereatleastsomewhatunhappy(Figure24andFigure25).

51%47%

44% 43% 41%35% 33% 33% 32%

25%

UAE (n=81) Italy (n=49) Spain(n=71)

TheNetherlands

(n=35)

SouthAfrica(n=56)

France(n=63)

UnitedKingdom(n=66)

Sweden(n=39)

Hungary(n=28)

Germany(n=64)

Percentage of Respondents in the EMEA Who Use Their Replacement Card Less as a Result of Fraud or a Breach

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Figure24:SatisfactionWithFinancialInstitutionAfterFraudinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Figure25:SatisfactionWithFinancialInstitutionAfterFraudinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Eventhoughsomanyconsumersareatleastsomewhatunhappywiththeirtreatmentsubsequenttoexperiencingfraud,relativelyfewconsumersreportthattheyswitchedfinancialinstitutions.TheUAEisastandoutwitha30%switchingrate(Figure26).Whiletheseratesmayseemrelativelylow,financialinstitutionsarecompetingforcustomers,anditismoreexpensivetoacquireacustomerthanitistokeepone;retainingcustomersresultsinbothretainingrevenueanddecreasingcosts.Hungary’srelativelylowsatisfactionratesdonottranslatetohigherswitchingnumbers.Itisnotclearwhatreasonscontributetothishighdegreeofloyalty.

7%

17%

3%

13%

13%

17%

8%

17%

20%

19%

27%

36%

41%

35%

47%

49%

40%

39%

32%

22%

The Netherlands(n=41)

Germany (n=53)

France (n=88)

Spain (n=79)

Italy (n=79)

Q. How happy were you with the treatment from your financial institution when you experienced card fraud?

Very unhappy Somewhat unhappy Somewhat happy Very happy

9%

5%

11%

14%

9%

10%

19%

22%

16%

25%

21%

19%

19%

24%

50%

59%

57%

48%

45%

16%

United Kingdom(n=86)

Sweden (n=42)

Hungary (n=27)

South Africa(n=98)

UAE (n=76)

Q. How happy were you with the treatment from your financial institution when you experienced card fraud?

Very unhappy Somewhat unhappy Somewhat happy Very happy

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Figure26:SwitchingBehaviorinEMEA

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Notallunhappyconsumersswitchfinancialinstitutionsafterexperiencingfraud,buttheycanstillnegativelyimpacttheirfinancialinstitution’srevenuebyusingtheircardlessoften.Itcanbecomea“let’sjustbefriends”typeofrelationship.Inmanycases,thereisachangeinwalletpositiononlyincertainsituations(Figure27andFigure28).Whilenotincludedinthesurveyquestions,anecdotalevidencesuggestsconsumerswilloftenchooseanalternativecardforonlinepurchasesandaseparateoneforPOSones.Thisquiterightlyispresentedtoconsumersasabestpracticetosegmentfordifferenttypesofriskinstorescomparedtoonline.

70%

82%

82%

83%

83%

84%

87%

90%

90%

93%

30%

18%

18%

17%

17%

16%

13%

10%

10%

7%

UAE (n=76)

Italy (n=79)

Spain (n=79)

United Kingdom(n=86)

Sweden (n=42)

South Africa(n=98)

Germany (n=53)

France (n=88)

The Netherlands(n=41)

Hungary (n=27)

Q. As a result of your experience with fraud, did you change your financial institution or credit card company?

No, I did not Yes, I did

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Figure27:Back-of-WalletBehaviorinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Figure28:Back-of-WalletBehaviorinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

CONSUMER ATT ITUDES TOWARD FRAUD Lessthanone-thirdofconsumersacrossEMEAhaveabsoluteconfidencethattheirfinancialinstitutioncanprotectthemfromfraud,thoughinallcountriesatleast60%believetheinstitutionsaredoingwhattheycantoprotectthem.Sweden,SouthAfrica,andtheNetherlandshavesomeofthelowestratesofconfidence(Figure29andFigure30).

3%

4%

2%

41%

46%

49%

54%

65%

46%

49%

32%

32%

33%

11%

5%

15%

12%

2%

Italy (n=79)

Spain (n=79)

Germany (n=53)

The Netherlands(n=41)

France (n=88)

Q. When you experienced fraud, did you choose to use cash or an alternative payment method over a credit or debit card following the card

fraud incident?

Used cash insteadof my debit card,but not insteadof my credit card

No Yes, but onlyin some situations

Yes, in allsituations

3%

2%

4%

4%

5%

21%

38%

48%

55%

64%

58%

45%

48%

32%

24%

18%

14%

9%

7%

UAE (n=76)

Sweden (n=42)

Hungary (n=27)

South Africa(n=98)

United Kingdom(n=86)

Q. When you experienced fraud, did you choose to use cash or an alternative payment method over a credit or debit card following the card

fraud incident?

Used cash insteadof my debit card,but not insteadof my credit card

No Yes, but onlyin some situations

Yes, in allsituations

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Figure29:Consumers’TrustinFinancialInstitutionsinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Figure30:Consumers’TrustinFinancialInstitutionsinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Consumersareunderstandablyconcernedaboutawiderangeoffinancialfraudtypes.Themajorityofconsumersareveryconcernedaboutidentitytheft,databreachesresultingincompromisedaccountnumbers,onlinebankingfraud,andfraudoncreditanddebitcards.ManyconsumersinEMEAarenotveryconcernedwithcheckfraud,aschecksaregenerallyutilizedlessthaninNorthAmericaandsomeothercountries.Thereiscertainlyafairbitofconcernaboutthemobilechannel;asmoreoptionsbecomeavailableandmoreconsumersusemobilepayments,thesenumbersarelikelytorise(Figure31andFigure32).

6%

11%

10%

15%

16%

19%

65%

59%

66%

53%

68%

21%

25%

17%

28%

11%

Germany (n=296)

Spain (n=290)

France (n=289)

Italy (n=294)

The Netherlands(n=297)

Q. Do you have confidence in your financial institution to protect you from card fraud?

No, I have verylittle confidencethey can

Not really,they coulddo more

Yes, to an extent,they're doingwhat they can

Yes,absoluteconfidence

5%

2%

3%

4%

9%

5%

9%

10%

12%

16%

51%

69%

54%

58%

59%

39%

20%

33%

27%

16%

Hungary (n=294)

United Kingdom(n=295)

UAE (n=279)

South Africa(n=295)

Sweden (n=296)

Q. Do you have confidence in your financial institution to protect you from card fraud?

No, I have verylittle confidencethey can

Not really,they coulddo more

Yes, to an extent,they're doingwhat they can

Yes,absoluteconfidence

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Figure31:Consumers’FraudConcernsinEurozone

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

67%

63%

53%

63%

56%

47%

35%

35%

22%

35%

35%

35%

29%

19%

25%

31%

24%

14%

55%

54%

44%

48%

40%

45%

25%

36%

35%

24%

26%

23%

14%

16%

17%

6%

18%

9%

75%

70%

65%

65%

65%

60%

47%

29%

34%

Identity theft

Data breach resulting in compromisedaccount numbers

Online banking fraud

Fraud on my credit card

Fraud on my debit card

Direct debit fraud (auto payment fromaccount)

Cheque/check fraud

Mobile wallets, or electronic pursessuch as using PayPal on a phone, or

using Apple Pay, Google Pay, ormaking in-app purchases

Fraud on my prepaid card

Percentage of Consumers Who Are Very Concerned About Fraud Types in EMEA

France (n=304)

Germany (n=301)

Italy (n=304)

The Netherlands(n=300)Spain (n=303)

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Figure32:Consumers’FraudConcernsinEMEA(Non-Eurozone)

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

43%

42%

39%

38%

33%

34%

25%

16%

11%

31%

26%

21%

24%

23%

16%

12%

5%

13%

70%

66%

65%

59%

59%

64%

40%

39%

26%

80%

76%

68%

62%

81%

60%

70%

42%

56%

60%

62%

62%

62%

57%

55%

49%

48%

46%

Identity theft

Data breach resulting in compromised account numbers

Online banking fraud

Fraud on my debit card

Fraud on my credit card

Direct debit fraud (auto payment from account)

Mobile wallets, or electronic purses such as using PayPal on a phone, or using ApplePay,

Google Pay, or making in app purchases

Cheque/check fraud

Fraud on my prepaid card

Percentage of Consumer Who Are "Very Concerned" about Fraud Types in EMEA

UK (n=300)Sweden (n=302)South Africa (n=303)Hungary (n=303)UAE (n=300)

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FRAUDINTHEASIA-PACIFICThefinalregioncoveredbytheconsumerfraudstudyistheAsia-Pacific,withsixcountriesincludedin2016.ConsumerbehaviorandattitudesinthisregionaresomewhatdifferentthaninEMEAandtheAmericas.

R I SKY BEHAV IOR ConsumerbehaviorinAustraliaandNewZealandtendstobefarlessriskythanintherestoftheAsia-Pacific.Thismaybeattributabletorelativelymorematurecardpaymentsmarketsandfraudcontrols.Thefaster-growingandmaturingmarkets,suchasThailand,Indonesia,andIndia,tendtoshowgreaterlevelsofriskybehavior.

TheverylowpercentagesofAustralianandNewZealandconsumerswhocarrytheirPINwithacardorrespondtoemailsandcallsaskingforbankaccountinformationmorecloselyresembleconsumersintheAmericasandEMEAthaninotherAsia-Pacificcountries.Largepercentagesofconsumersinallcountriesleavesmartphonesunlockedwhennotinuseandthrowdocumentswithbankaccountnumbersinthebin.

Thepatterntendstoholdthatfast-growingThailand,India,andIndonesiaexhibitsomeofthehighest-riskbehaviors.Muchofthismightbeattributedtolessconsumereducationandexperiencewithpaymentcards.InallcountriesexceptAustraliaandNewZealand,over20%ofconsumersbankorshoponlineoncomputerswithoutsecuritysoftwareoronpubliccomputers(Figure33).Inanumberofcountries—again,thosegrowingquickly—consumersgenerallydonothavestrongbroadbandconnectionsathome,andmanyconsumersrelyoninternetcafeswhenactivescannotbecompletedonamobiledevice.Forexample,internetcafesareverypopularinThailandamonglocalsandtourists,andsomeneighborhoodsseemtohaveoneoneverycorner.

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Figure33:RiskyBehaviorintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

TheAsia-Pacificdoesnotshowcleartrendsforgrowthordeclineinriskybehaviors.Itisclearthatmorematuremarkets,suchasNewZealandandAustralia,demonstratelowerincidenceofriskybehavior.2016ratesarerelativelysimilarto2014ones,however.Thisimpliesanopportunityforconsumereducationspecificallyfocusedonhowcustomers’behavioraffectsthepotentialforfraud(Figure34).

23%

15%

11%

5%

7%

35%

24%

19%

10%

12%

22%

34%

30%

20%

19%

34%

31%

29%

19%

21%

28%

26%

10%

3%

4%

30%

36%

43%

25%

19%

Thrown papers ordocuments with account

numbers (e.g., bankstatements) in the trash bin

Left smartphone unlockedwhen not using it

Used online banking orinternet shopping withoutsecurity software or on a

public computer

Responded to emails orcalls asking for bank

details

Made a note of your PINand carried it with you or

kept it with your card

Q. Which of the following have you done in the past 5 years?

Australia (n=300)

Singapore (n=303)

India (n=300)

Indonesia (n=300)

New Zealand (n=301)

Thailand (n=300)

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Figure34:RiskyBehaviorTrendsintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

IneverycountryoftheAsia-Pacificregion,riskybehaviorandexperiencingfraudclearlycorrelate.ThisismostclearinIndia,Thailand,andIndonesia.Again,educatingconsumersaboutriskybehaviorsandtheneedtoavoidthemaswellasalternativebehaviors(suchasLinuxinstallationsthatcanrunoffaUSBkey)canhelpreducefraudincidentsandhelpconsumersfeelsomeelementofconfidenceintheirabilitytoprotectthemselvesfromfraud(Figure35).

25% 19% 15% 21% 14% 12% 4% 4% 6% 7% 19%

28%22% 37% 34% 37% 35%

32% 28% 23% 23%30%

31%30%

27% 29%24%

19%13% 10% 8% 11%

43%

22%20% 16%

19%14%

10%

5%

25%

29%34% 28%

31%32%

24%

20% 26%21% 15%

36%

2014(n=310)

2016(n=300)

2014(n=330)

2016(n=300)

2014(n=311)

2016(n=303)

2014(n=310)

2016(n=301)

2014(n=310)

2016(n=300)

2016(n=300)

India Indonesia Singapore New Zealand Australia Thailand

Risky Behavior Trends Over 2014 and 2016

Left smartphone unlocked when not using itResponded to emails or calls asking for bank detailsUsed online banking or internet shopping without security software or on a public computerThrown papers or documents with account numbers (e.g., bank statements) in the trash binMade a note of your PIN and carried it with you or kept it with your card

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Figure35:RiskyBehaviorandFraudExperiencedintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

R EPLACEMENT CARDS IntheAsia-Pacificregion,consumerswhoreceivedatleastonereplacementcardrangefromalowof14%inThailandtoalmost34%inSingapore.ThismaybeareflectionoftargetedfraudattacksanddatabreachespointedtomoreaffluentregionssuchasSingapore,India,Australia,andNewZealand.Asinotherregions,someconsumersreceivedmultiplereplacementcardsduringthepastyear(Figure36).

64%

54%

65%

62%

82%

55%

89%

69%

85%

75%

91%

73%

36%

46%

35%

38%

18%

45%

11%

31%

15%

25%

9%

27%

Did not engage in riskybehavior (n=170)

Engaged in riskybehavior (n=125)

Did not engage in riskybehavior (n=100)

Engaged in riskybehavior (n=191)

Did not engage in riskybehavior (n=78)

Engaged in riskybehavior (n=204)

Did not engage in riskybehavior (n=55)

Engaged in riskybehavior (n=213)

Did not engage in riskybehavior (n=142)

Engaged in riskybehavior(n=153)

Did not engage in riskybehavior (n=54)

Engaged in riskybehavior (n=210)

Aust

ralia

Sing

apor

eIn

dia

Indo

nesi

aN

ewZe

alan

dTh

aila

ndFraud Experienced by Respondents Who Did and Did Not Participate in Risky

Behavior in the Asia-Pacific

Have not experienced card fraud Have experienced card fraud

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Figure36:ReplacementCardsintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

ManyconsumersacrosstheAsia-Pacificregionusedreplacementcardslessthantheoriginalcards.Thisback-of-walletbehavioroccurredatveryhighratescomparedtootherregions—from31%inAustraliato74%inThailand.Thisbehaviorrepresentslostrevenueforfinancialinstitutionsandsurelyshowsconsumers’lackofconfidenceaswellasanincreasingvarietyofnoncard-basedpaymentoptionsavailabletoconsumers(Figure37).

Figure37:UseofReplacementCardsintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

86%

85%

79%

72%

69%

66%

13%

14%

17%

21%

24%

26%

6%

4%

7%

Thailand (n=264)

New Zealand(n=295)

Indonesia (n=268)

Australia (n=295)

India (n=282)

Singapore (n=291)

Q. Has your financial institution sent a new debit, credit, or prepaid card to you during the past year because of a data breach or fraudulent

activity?

No Yes, once Yes, twice Yes, 3 times Yes, more than 3 times

74%

62%58%

36% 36%31%

Thailand (n=38) India (n=87) Indonesia(n=55)

Singapore(n=98)

New Zealand(n=45)

Australia (n=84)

Percentage of Respondents in the Asia-Pacific Who Use Their Replacement Card Less as a Result of Fraud or a Breach

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Consumersatisfactionrateswithfinancialinstitutions’aftercareexperiencevarydramaticallybycountry.InAustralia,85%ofconsumerswereatleastsomewhathappyafterafraudexperience,andinNewZealand,77%wereatleastsomewhathappy.Intheothercountries,highpercentagesofconsumerswereunhappyaftertheirfraudexperience:40%wereatleastsomewhatunhappyinSingapore(increasedfrom33%in2014),48%inIndia,and42%inIndonesia(Figure38).Inmanycases,customeraftercareisstillevolving,asisthesophisticationofcardfraudmonitoringinthegrowingeconomies.ThisisagainclearcomparedtothemorematuremarketsinAustraliaandNewZealand.

Figure38:SatisfactionWithFinancialInstitutionAfterFraudintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Comparedtootherregions,theAsia-Pacific’sswitchingratesareratherhigh.InThailand,India,andIndonesia,between44%and48%ofconsumersswitchfinancialinstitutionsaftertheirfraudexperience.Theseveryhighratesofcustomerattritionareverycostlytofinancialinstitutions.InSingapore,21%ofconsumersswitchfinancialinstitutionsafterexperiencingfraud,muchgreaterthaninAustraliaandNewZealand.Thisistroubling,asSingaporeisawealthycountrywithwell-establishedglobalbanks,regulations,andtechnologytools.

AustraliaandNewZealandhavethelowestratesofswitchingbehavior,at13%and8%,respectively,whichismuchmoresimilartoNorthAmericaandWesternEuropethanotherpartsoftheAsia-Pacific(Figure39).MuchlikeintheAmericas,theremaybemorestickinesswithconsumersinAustraliaandNewZealandduetomorein-depthrelationshipsviamultipleproducts,whereasconsumersinthegrowingeconomiesmayhavemorewillingnesstoswitchandarelesscloselytiedtoagiveninstitution.ThereisanopportunityinThailand,India,andIndonesiatocreatestickiermultiproductrelationshipsandloyaltyprograms.

17%

20%

18%

13%

11%

10%

7%

28%

24%

27%

26%

33%

37%

36%

44%

48%

55%

52%

40%

16%

14%

12%

8%

Australia (n=119)

New Zealand(n=60)

India (n=106)

Indonesia (n=71)

Singapore (n=107)

Thailand (n=62)

Q. How happy were you with the treatment from your financial institution when you experienced card fraud?

Very unhappy Somewhat unhappy Somewhat happy Very happy

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Figure39:SwitchingBehaviorintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Somewhatsurprisingly,countrieswithhigherfraudratesandlowerlevelsofcustomeraftercaredonotshowparticularlyhighratesofmovingcardstobackofwallet.Indonesia,Thailand,andIndiashowlargeproportionsofconsumerswhoonlychangewalletpositionbehaviorinsomesituations(Figure40).

Figure40:Back-of-WalletBehaviorintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

52%

52%

56%

79%

87%

92%

48%

48%

44%

21%

13%

8%

Thailand (n=62)

India (n=106)

Indonesia (n=71)

Singapore (n=107)

Australia (n=119)

New Zealand(n=60)

Q. As a result of your experience with fraud, did you change your financial institution or credit card company?

No, I did not Yes, I did

4%

10%

2%

3%

3%

14%

18%

13%

49%

54%

68%

69%

58%

56%

38%

31%

23%

13%

23%

21%

11%

12%

5%

Indonesia (n=71)

India (n=106)

Thailand (n=62)

Singapore (n=107)

Australia (n=119)

New Zealand(n=60)

Q. When you experienced fraud, did you choose to use cash or an alternative payment method over a credit or debit card following the card

fraud incident?

Used cash insteadof my debit card,but not insteadof my credit card

No Yes, but onlyin some situations

Yes, in allsituations

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CONSUMER ATT ITUDES TOWARD FRAUD Muchlikeotherregions,theAsia-Pacificenjoysastrongconsumersentimentthatfinancialinstitutionsareatleastdoingthebesttheycantopreventfraud(Figure41).SingaporeandThailandhavethelowestlevelsofconfidence,witheachshowinga15%unfavorableview.Asinothergeographies,marketinganddemonstratingtocustomersthecontrolsandtechnologiesthatareinplacecanimprovecustomersatisfaction.

Figure41:Consumers’TrustinFinancialInstitutionsintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

Acrossallcountries,consumersintheAsia-Pacificaremostconcernedaboutidentitytheft,databreachesresultingincompromisedaccountnumbers,andonlinebankingfraud(Figure42).Singaporestandsoutasmostconcernedinnearlyeverycategory,whichreflectstheseconsumers’relativelylowconfidencethatinstitutionsareprotectingthemcomparedtotheconfidenceofconsumersinothercountries.CheckfraudismuchmoreofaconcerninIndia,Singapore,andIndonesiathaninmostofEMEA,aschecksaremorecommonlyusedintheAsia-PacificcomparedtomostofEMEA.

3%

6%

7%

7%

9%

13%

13%

49%

70%

64%

59%

60%

71%

45%

22%

27%

29%

25%

14%

India (n=282)

New Zealand(n=295)

Australia (n=295)

Indonesia (n=268)

Thailand (n=264)

Singapore (n=291)

Q. Do you have confidence in your financial institution to protect you from card fraud?

No, I have verylittle confidencethey can

Not really,they coulddo more

Yes, to an extent,they're doingwhat they can

Yes,absoluteconfidence

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Figure42:Consumers’FraudConcernsintheAsia-Pacific

Source:AiteGroup,ACIWorldwidestudyofconsumersin20countries,Q22016

50%

47%

43%

37%

33%

30%

30%

15%

16%

72%

69%

71%

68%

58%

62%

58%

40%

35%

62%

65%

66%

58%

64%

62%

46%

56%

47%

75%

73%

65%

65%

65%

61%

45%

49%

54%

38%

35%

34%

32%

24%

26%

31%

13%

13%

53%

38%

47%

45%

44%

37%

34%

27%

28%

Data breach resulting in compromised account numbers

Identity theft

Online banking fraud

Fraud on my credit card

Fraud on my debit card

Direct debit fraud (auto payment from account)

Mobile wallets, or electronic purses such as using PayPal on a phone, or using ApplePay,

Google Pay, or making in app purchases

Cheque/check fraud

Fraud on my prepaid card

Percentage of Consumer Who Are "Very Concerned" about Fraud Types in The Asia-Pacific

Australia (n=295)Singapore (n=291)India (n=282)Indonesia (n=268)New Zealand (n=295)Thailand (n=264)

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RECOMMENDATIONSWhenconsumersarenotengagedinthefraud-preventionprocessandunawareofhowtheirbehaviorsputthematrisk,financialinstitutionsandconsumerssuffer.Thereisgreatmutualbenefitincreatingapartnershipwithconsumersbyprovidingeducationtoreducetheriskoffraudinthefirstplace,thenhavingstrongaftercareprocesseswhenafrauddoesoccur.Doingsocanbothreducecostsandpreserverevenue.

Atthesametime,inthecaseofdatabreachesorskimming,thereislittleifanythingtheinstitutionorconsumercando.Helpingconsumersunderstandthattheseeventsarenotalwaystheinstitution’sfaultandcommunicatingclearlywhatactionsarebeingtakencangoalongwaytowardimprovingconsumerconfidence.

Forfinancialinstitutions:

• Customereducationandparticipation:Thiscancomeinmanyforms,suchasonthewebsiteormobileapp,asapartofemailnotifications,community“shredit”days,andthroughtheaftercareprocess.Ensuretheyhaveabasicunderstandingofhowtheinstitutioniskeepingthemsafe,too.

• Offerexamplecases:Manyconsumersdorealizesomeoftheirbehaviorsareriskyanddon’tnecessarilyknowwhatalternativesareavailabletothem.Oneapproachistocreateashortstoryexplainingtheriskybehavior,thepotentialforfraud,andalternativeactions.Thiscanbringthemessagehometoconsumers.Forexample,consumerswhoneedtouseinternetcafesorotherinsecureconnectionscanbeinstructedonhowtouseaUSB-basedLinuxinstancetorunmoresecuresessions.AnotherexampleishelpinguserscreateamnemonictohelprememberPINsandpasswords.

• Communicateclearlyandsimply:Ensureconsumersunderstandthereasonforareplacementcard,thatitissafetouse,andwhyitissafetouse.Makefraudprotectioneffortseasytounderstandandeasilyavailable,withoutexposingtoomuchinformationtofraudsters.Explainclearlywhythecardwasreissued—becauseoffraud,toreplacestripewithchip,oraspartofthegeneralexpirycycle.

• Focusoncustomerexperience:Afterexperiencingfraud,consumersareoftenemotional.Trainagentstobeempatheticandhelpfultothegreatestextentpossibletoretainvictimizedcustomers.Remindagentsthatwhiletheyworkonfraudcaseseveryday,thecustomerontheotherenddoesn’thavethatexperience.

• Focusonlayersofsecurity:Thereisno“silverbullet”solution,butconsiderhowtoolslike3-DSecure,transactionmonitoring,andbiometricauthenticationcouldenhancebothsecurityandcustomerservice.

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RELATEDAITEGROUPRESEARCHCombatingFraud:ConsumerPreferences,January2016.

NotYourFather’s3-DSecure:AddressingtheRisingTideofCNPFraud,February2016.

EMV:IssuanceTrajectoryandImpactonAccountTakeoverandCNP,May2016.

Digital-ChannelFraudMitigation:TheMobileForceAwakens,June2015.

PaymentCards:CurrentThreatsandProtections,September2014.

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ABOUTAITEGROUPAiteGroupisaglobalresearchandadvisoryfirmdeliveringcomprehensive,actionableadviceonbusiness,technology,andregulatoryissuesandtheirimpactonthefinancialservicesindustry.Withexpertiseinbanking,payments,insurance,wealthmanagement,andthecapitalmarkets,weguidefinancialinstitutions,technologyproviders,andconsultingfirmsworldwide.Wepartnerwithourclients,revealingtheirblindspotsanddeliveringinsightstomaketheirbusinessessmarterandstronger.VisitusonthewebandconnectwithusonTwitterandLinkedIn.

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