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It’s Business as Usual for Most Consumers Impacted by Payment Card Fraud

In 2018, millions of consumers had their personal data compromised by breaches across a diverse set of industries—from tech to retail to hospitality and more—putting many at risk of payment card fraud. Most consumers are aware of their data’s exposure, but 91% believe their credit card issuer will cover them in the event of fraud. But this confidence causes some consumers to put themselves in harm’s way, according to Auriemma Research’s most recent issue of The Payments Report.

Fraud events have become mainstream, leading many consumers to feel numb to its consequences. According to Auriemma Roundtable’s Q4-2018 Card Fraud Benchmark Report, seven-in-ten financial institutions saw an increase in gross credit card fraud compared to the prior quarter; a similar number of issuers are forecasting gross fraud will stay the same or increase in 2019. Meanwhile, nine-in-ten consumers believe fraud has stayed the same or increased over the past year, according to Auriemma Research data.

“Many consumers have accepted fraud as a fact of life,” says Jaclyn Holmes, Director of Auriemma Research. “They know fraud happens, many are concerned it will happen to them, but they’re also confident that their issuers will take care of them.”

When asking consumers about how credit card issuers respond to fraud, Auriemma Research found over eight-in-ten say issuers react quickly and are good at monitoring. Even the one-fifth who say they’ve experienced card fraud in the past year share these positive sentiments. While a noteworthy 22% of these consumers say the experience has caused them to spend less on the impacted card, 15% spend more, and 63% don’t change their spending at all. In general, fraud events don’t appear to leave a lasting stain on payment behavior with the compromised card.

“In the court of public opinion, banks don’t appear to be to blame for fraud,” says Holmes. “But as fraud remains high industry-wide, issuers are now tasked with finding ways to further engage their customers in the fight, namely by reducing risky payment behavior and signing up for proactive protections.”

Consumers, however, are not demonstrably concerned with proactive, preventative measures. Over one-quarter of cardholders are comfortable making online purchases from unfamiliar websites, likely a direct result of the confidence consumers have in banks’ protective measures. In addition, over four-in-ten cardholders say they haven’t changed the password for their debit or credit card account in over a year. Other precautions, like fraud alerts, identity theft protection, and two-factor authentication are not overwhelming used by consumers.

“While issuers try to arm their customers with tools to defend against the impact of fraud, many aren’t taking advantage,” says Holmes. “Consumer complacency could be a challenge in 2019 and beyond, and if issuers aren’t able to enlist their cardholder’s support against fraudsters, we may see losses grow.”

Survey Methodology

This Auriemma Research study was conducted online within the US by an independent field service provider on behalf of Auriemma Consulting Group among 800 US adult debit cardholders in March 2018. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying. The average interview length was 25 minutes. For more information, call Jaclyn Holmes at (212) 323-7000.

About Auriemma Fraud Control Roundtables

Auriemma runs a series of information sharing and benchmarking groups for executives in fraud strategy and operations. Spanning credit card, debit card, and consumer banking, Auriemma’s fraud control roundtables combine executive meetings, industry-leading operational benchmarking, and peer group surveys to help participants identify vulnerabilities and optimize fraud management strategies. For information on membership, contact Ira Goldman at 212-323-7000.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, visit us at www.auriemma.group.

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Worries About Payment Card Fraud Mounting Among US Consumers

(New York, NY):  US consumers worry about payment card fraud, with over half saying it’s increased in the past year.  And it’s not an idle fear—42% have personally experienced card fraud, half of them multiple times.  But almost all report a satisfactory resolution by their bank, according to recent research from Auriemma Group. The recent survey of 500 debit cardholders found that many consumers are fatalist about the chances of it happening again: 46% think it’s likely that they’ll experience card fraud in the next five years.

Consumers are skeptical about the efficacy of security solutions in the market.  While most consider chip cards to be more secure than the traditional mag stripe, only 32% think that the introduction of chip cards has decreased the level of card fraud, while the majority (58%), say that EMV has had no impact.

Despite these doubts, cardholders express willingness to use stronger authentication methods.  Only 38% say they’ve encountered two-step authentication, but the great majority agree that there are some sites where they’d prefer this safety measure. 70% say they’d enable two-step authentication for their online account if it were offered by their primary bank.

Their willingness to go through a more time-consuming process varies by the size of the transaction, however.  When asked about a hypothetical $100 purchase, 85% agreed that security is more important than speed.  In the case of a $5 purchase, however, that drops to 70%, with 30% who want that transaction to be fast, ‘even if it means fewer security steps’. “The importance of security seems to fluctuate according to purchase amount,” said Jaclyn Holmes, the senior manager who directed the study. “In reality, the amount of the purchase has nothing to do with a fraudster’s ability to steal a consumer’s information, but consumers tend to care more about speed than security for smaller transactions.”

And despite their concern with security, Americans confess to taking time-saving shortcuts.  More than two-thirds save passwords on their devices for at least some of their accounts, most commonly email and social media.  Not surprisingly, the lure of convenience increases with the amount of online activity: 30% of those who shop online weekly say they save the password for nearly all their accounts, double the proportion of less frequent shoppers.

One of the most popular ways to save time online is by using one-click checkouts, and Amazon’s 1-Click and PayPal’s One Touch, the two most popular, both have high levels of satisfaction.  But non-users fear that this convenience comes at a price.  While almost two-thirds of all respondents thinks one-click makes the payment process more enjoyable, virtually the same percentage say it will make online shopping more vulnerable to fraud. “Many cardholders are uneasy with the idea of being permanently logged on,” Holmes notes. “Consumers appreciate the convenience of being able to breeze through online check-out with a single click, but it may be leading some to wonder whether that same convenience could make them a tempting target for fraud.”

The idea that extra security takes extra time makes sense to these consumers:  their new, more secure chip card transactions take longer, and they want two-step sign-ins on their most sensitive accounts.  “This mind-set may make it harder for mobile payments to gain mass acceptance”, says Marianne Berry, Auriemma’s Managing Director of Payment Insights. When asked to choose the most secure payment method, 42% of survey respondents chose chip cards, three times the number that chose mobile.  “Most early adopters of mobile payments have some understanding of the concept of tokenization and view it as a very secure way to pay,” Berry noted.  “But in the general population, mobile’s speed and convenience can equate to being less safe.  To convert non-users, marketing messages should highlight how mobile pay transactions mask the payment card information.  Consumers need to hear that it’s just as safe as a chip card transaction, but faster—and a lot more fun.”

Survey Methodology

The study was conducted online among 500 debit card users in May 2016. Respondents were recruited from Instantly’s web panel, and fieldwork was conducted by Issues and Answers. The purpose of the research was not disclosed nor did respondents know the criteria for qualifying. The average interview length was 20 minutes.

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.

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Card Fraud Hits 1 in 4 Consumers, but Most Are Satisfied by Bank Response

(New York, NY):  Over one-quarter (26%) of US consumers report having experienced credit and/or debit card fraud in a newly released study conducted in Cardbeat,® Auriemma Group’s syndicated research publication. Among fraud victims, one in five (20%) said that their fraud experience was directly linked to a data breach that became public knowledge.  Most consumers discover fraudulent transactions while reviewing their monthly statements, and erroneous retail charges are the most common type of fraud experienced, cited by 80% of those who report experience with card fraud.

Despite the rising incidence of fraud on payment cards, few consumers state that the experience has affected their willingness to use their debit or credit cards, a response that can be attributed their banks’ responsiveness. Three-quarters of consumers who reported having experienced payment card fraud stated that they were “very satisfied” with their bank’s response, and another 20% were “somewhat satisfied.”  Most (76%) consumers who experience card fraud were issued a brand new card with a different account number, and 65% say their account was credited for the disputed charges.

“For the most part, consumers seem to tolerate the fact that fraud is a potential risk of using payment cards, and most are appreciative of card issuers’ willingness to protect them from major security issues.  For example, 72% of all consumers who have experienced an unplanned card reissue say that their perception of their financial institution was positively influenced by the issuer response,” noted Marianne Berry, Managing Director of the Payment Insights practice. “However, the rising incidence of data breaches means that mass reissuance of cards is becoming more frequent, and some consumers have had their cards replaced multiple times in a short time frame.”  She noted that while overall satisfaction is high among those who receive new cards after a fraud incident, one-fifth (19%) of respondents report that they’ve received new credit cards due to fraud twice or more in the recent past, and their perceptions tend to decline with each subsequent reissue.

Ms. Berry says that banks still have opportunities to improve already-positive consumer perceptions.  She says “Involving marketing people in the correspondence may be an opportunity to improve the process for all parties involved.”  She noted that if the letter accompanying a new payment card is clearer about the reason a new card is being sent, consumers may be more likely to view the decision positively, regardless of how many times they’ve had cards reissued, adding that “providing consumers with a checklist of their recurring payment arrangements can also help reduce the hassles associated with switching card numbers.”

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call 212-323-7000.

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