For the most part, delinquency rates among credit cards, mortgages and other loans have been on the decline as the effects of the financial crisis wane, and more consumers are able to pay back their debts. But something that has not been discussed as much in the credit card industry is fraud. Discover found this week that its fraud losses were 70 percent higher in 2012 than in 2010, reaching $93 million in all. Other credit card companies may have seen similar losses, but with fraud protection software and other forms of technology, banks can keep fraud rates down.
According to American Banker, one of the biggest reasons for the increase in fraud losses in the past two years is because American credit cards don’t use EMV, which stands for Europay, MasterCard and Visa, the “the networks that set the global standard for security chips embedded in payment cards.” The chips used in EMV cards are known for being more secure than the magnetic stripe used on American credit cards.
Credit card companies have stated that they will require merchants to have the technology used by EMV by October 2015, setting a time limit for people cashing in on credit card fraud now. However, this deadline is still in the distance, and companies other than Discover may see profits fall if more fraudsters continue to rely on the more susceptible, American cards, especially as 2015 approaches.
Until then, companies can still work to keep both default and fraud rates down among credit cards. With credit risk software, companies can obtain a more holistic view of customers to determine the credibility and quality of borrowers, and keep fraud rates from increasing in the future.