High-profile data breaches at retailers and the increasing frequency of identity theft is creating wavering consumer confidence in card-based transactions. Nearly two in 10 people in a recent survey lack confidence that their financial institution can protect them against fraud. And 55% said they are “very concerned” about reclaiming their financial identity if they fall victim to identity theft
The survey from ACI Worldwide noted that with 1,367 confirmed data breaches in 2013 alone, the security of the financial services value chain is top-of-mind for consumers. And with good reason: a global fraud study of more than 6,100 consumers across 20 countries revealed that one in four consumers has been a victim of card fraud in the last five years. More than one in 10 have experienced fraud multiple times during the past five years.
Card fraud comprises unauthorized activity on three types of payment cards – debit, credit and prepaid. Cardholders experience fraud at very different rates around the globe, and each type of card has unique fraud challenges. The study found that the UAE has the highest rate of fraud overall at 44%, followed by China at 42%, and India and the US at 41% each. In Europe, the UK has the dubious honor of being the most afflicted, as Infosecurity previously reported.
“As organized fraud rings relentlessly develop new methods of stealing funds and identities, consumers are increasingly losing confidence that there is anything that can be done to reverse this downward spiral,” the report noted.
Victims are taking matters into their own hands as well. The survey highlighted that 23% of consumers changed financial institutions due to dissatisfaction after experiencing fraud. A majorty (63%) of global consumers (respondents) who have experienced fraud now use their cards less frequently. In addition, 43% who received replacement cards as a result of data breach or fraudulent activity use their new card less than the original.
"Consumers are increasingly concerned about fraud, and are losing confidence on a variety of levels,” said Mike Braatz, senior vice president of payments risk management solutions at ACI Worldwide, in a statement. “They are unsure that their financial institutions can protect them against fraud; they use replacement cards less often due to a loss of confidence in the card or card issuer, after experiencing fraud; and post-fraud, they often change providers or their cards go to back of wallet. This has immediate and long-term implications on customer loyalty, revenue and fee income.”
However, it’s clear that the consumers themselves also bear responsibility for the situation. The survey found that 50% exhibit at least one risky behavior that puts them at higher risk of financial fraud
“Given this latest data, financial institutions have their work cut out for them, both in terms of educational and preventative measures,” said Shirley Inscoe, senior analyst at Aite Group, which co-sponsored the study. “Consumers lack confidence in their bank’s ability to protect them from fraud, so banks must remain vigilant in their fraud migration efforts or face increased customer attrition.”