Fraud Prevention Declining, But Detection Rebounding

Jun 12, 2012

Fraud Prevention Declining, But Detection Rebounding

Javelin Awards Top Honors to Bank of America, American Express, BB&T, Capital One and Discover

San Francisco, CA, June 12, 2012Javelin Strategy & Research’s Eighth Annual Card Issuers’ Safety Scorecard reveals that fraud prevention declined for the third year in a row, while fraud detection increased dramatically. Javelin evaluated the customer-facing security measures of 23 of the top U.S. credit card issuers, by cards outstanding, using its Prevention, Detection, and ResolutionTM (PDR) model. Javelin found that issuers met 44% of fraud prevention criteria in 2012, declining from 54% in 2011. This decline in prevention activities correlates with Javelin’s recent consumer research showing that credit card identity fraud increased by 87% in 2011. But there is good news. Fraud detection tools have been increasing. Issuers met 61% of the detection criteria in 2012, up from 49% in 2011. This increased effort in detection, even with more challenging fraudster’s strategies, has resulted in total cost of fraud rising marginally, signaling that card issuers are investing in processes to detect fraud earlier.

Issuers were scored on a base of 100 points for meeting 60 different criteria in prevention, detection and resolution processes. Javelin awarded top honors to Bank of America for Best in Class-Overall for the sixth consecutive year, as well as earning Best in Prevention this year. Capital One received Best in Detection, while American Express, Bank of America, BB&T, and Discover tied for Best in Resolution. Javelin’s PDR model highlights key areas where credit card issuers can focus their efforts to reduce fraud and associated costs. For example in the area of detection, a growing number of issuers are offering a wider selection of personal information change alerts to mitigate account takeover fraud. However, 1 in 6 issuers still do not provide an alert when a consumer’s physical address or primary phone number changes, the most common means of account takeover fraud. In general, issuers excel in meeting most resolution criteria, but still fall short in several key areas.

“Preventive measures offer the greatest return to both the consumer and the issuer,” said Victor S. Wheatman, Director, Security, Risk and Fraud at Javelin. “We recommend that issuers create a dynamic educational environment to help consumers spot scams and give them a wide variety of alerts to adjust their security to fit their individual needs.”

“The overall recommendations provide a general guide as to where card issuers need to focus their efforts to eliminate fraud,” said Jim Van Dyke, President, Javelin. “But card issuers will benefit greatly by getting their individual scorecard ratings and receiving specific recommendations that will impact their bottom line and reduce fraud costs.”

Javelin’s Eighth Annual Card Issuers' Safety Scorecard: Proliferation of Alerts Lead to Quicker Detection Time and Lower Fraud Costs analyzes and ranks 23 of the top U.S. credit card issuers, using Javelin’s PDR model. The report is based on two online surveys of over 5,000 consumers each and an in-depth evaluation of card issuers including “mystery shopper” research and a review of issuer’s online presence. Javelin examines issuers’ consumer-facing security features and pinpoints those areas in prevention, detection, and resolution where card issuers and third-party security vendors can invest to make the greatest impact to eliminate fraud.

Selected Key Report Findings – Eighth Annual Issuers’ Safety Scorecard

  • Bank of America received top honors for “Best in Class” and “Best in Prevention”
  • Capital One received “Best in Detection”
  • American Express, Bank of America, BB&T, and Discover tied for “Best in Resolution”
  • 17% of card issuers did not offer personal information change alerts for either changes to a consumers’ primary phone number or physical address change—two activities that are the most common means of account takeover fraud.

To learn more, click here: Eighth Annual Card Issuers‘ Safety Scorecard: Proliferation of Alerts Lead to Quicker Detection Time and Lower Fraud Costs

Related Javelin Research:

About Javelin Strategy & Research

Javelin Strategy & Research provides strategic insights into customer transactions, increasing sustainable profits for financial institutions, government, payments companies, merchants and other technology providers. Javelin’s independent insights result from a uniquely rigorous three-dimensional research process that assesses customers, providers, and the transactions ecosystem.

Media Contact
Nancy Ozawa
Marketing Communications
(925) 219-0116