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

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2016GlobalConsumerCardFraud:WhereCardFraudIsComingFrom

JULY2016

BenKnieff

Researchsponsoredby:

2016GlobalConsumerCardFraud:WhereCardFraudIsComingFrom July2016

©2016AiteGroupLLC.Allrightsreserved.Reproductionofthisreportbyanymeansisstrictlyprohibited.101ArchStreet,Suite501,Boston,MA02110•Tel+1.617.338.6050•Fax+1.617.338.6078•[email protected]•www.aitegroup.com

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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


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


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)







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



19

Figure10:ReplacementCardsintheAmericas


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



20

Figure11:UseofReplacementCardsintheAmericas


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



21

Figure12:SatisfactionWithFinancialInstitutionAfterFraudintheAmericas


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%


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



22

Figure13:SwitchingBehaviorintheAmericas


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

Figure14:Back-of-WalletBehaviorintheAmericas


77%

82%

89%

94%

23%

18%

11%

6%

Mexico (n=159)

Brazil (n=137)

Canada (n=105)


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)


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



23

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

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

Figure15:ConsumerTrustinFinancialInstitutionsintheAmericas


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%


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



24

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

Figure16:Consumers’FraudConcernsintheAmericas


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)



25

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


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%




bin


public computer




details


France (n=304)

Germany (n=301)

Italy (n=304)

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



26

Figure18:RiskyBehaviorinEMEA(Non-Eurozone)


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%




bin


public computer




details


United Kingdom

UAE (n=300)

Sweden (n=302)

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



27

Figure19:RiskyBehaviorandFraudExperiencedinEurozone


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)









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




28

Figure20:RiskyBehaviorandFraudExperiencedinEMEA(Non-Eurozone)


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%











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




29

Figure21:ReplacementCardsinEurozone


Figure22:ReplacementCardsinEMEA(Non-Eurozone)


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)


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)


activity?

No Yes, once Yes, twice Yes, 3 times



30

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

Figure23:UseofReplacementCardsinEMEA


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



31

Figure24:SatisfactionWithFinancialInstitutionAfterFraudinEurozone


Figure25:SatisfactionWithFinancialInstitutionAfterFraudinEMEA(Non-Eurozone)


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%


Germany (n=53)

France (n=88)

Spain (n=79)

Italy (n=79)



9%

5%

11%

14%

9%

10%

19%

22%

16%

25%

21%

19%

19%

24%

50%

59%

57%

48%

45%

16%


Sweden (n=42)

Hungary (n=27)

South Africa(n=98)

UAE (n=76)





32

Figure26:SwitchingBehaviorinEMEA


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)


Sweden (n=42)

South Africa(n=98)

Germany (n=53)

France (n=88)


Hungary (n=27)





33

Figure27:Back-of-WalletBehaviorinEurozone


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


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)


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



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)



fraud incident?






34

Figure29:Consumers’TrustinFinancialInstitutionsinEurozone


Figure30:Consumers’TrustinFinancialInstitutionsinEMEA(Non-Eurozone)


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)







5%

2%

3%

4%

9%

5%

9%

10%

12%

16%

51%

69%

54%

58%

59%

39%

20%

33%

27%

16%

Hungary (n=294)


UAE (n=279)

South Africa(n=295)

Sweden (n=296)








35

Figure31:Consumers’FraudConcernsinEurozone


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




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


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)



36

Figure32:Consumers’FraudConcernsinEMEA(Non-Eurozone)


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




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


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)



37

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.



38

Figure33:RiskyBehaviorintheAsia-Pacific


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%


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



public computer


details




Australia (n=300)

Singapore (n=303)

India (n=300)

Indonesia (n=300)

New Zealand (n=301)

Thailand (n=300)



39

Figure34:RiskyBehaviorTrendsintheAsia-Pacific


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



40

Figure35:RiskyBehaviorandFraudExperiencedintheAsia-Pacific


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=153)



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




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Figure36:ReplacementCardsintheAsia-Pacific


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

Figure37:UseofReplacementCardsintheAsia-Pacific


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)


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


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)





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Figure39:SwitchingBehaviorintheAsia-Pacific


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

Figure40:Back-of-WalletBehaviorintheAsia-Pacific


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)



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)


fraud incident?






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

Figure41:Consumers’TrustinFinancialInstitutionsintheAsia-Pacific


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)








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Figure42:Consumers’FraudConcernsintheAsia-Pacific


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




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


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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