Federal Reserve Payments Study finds U.S. payments fraud
a small but growing fraction of overall payments
The value of fraudulent noncash payments in the United States rose significantly between 2012 and 2015--outpacing growth in noncash payments overall, according to a new report based on Federal Reserve Payments Study data. The study's survey of depository institutions found that the value of noncash payments fraud rose 37 percent from $6.1 billion in 2012 to $8.3 billion in 2015. Over the same period, the total value of noncash payments rose 12 percent from $161.2 trillion to $180.3 trillion.
The report provides estimates of payments fraud totals and rates for payments processed over general-purpose credit and debit card networks, including non-prepaid and prepaid debit card networks, the automated clearinghouse (ACH) transfer system, and the check clearing system. These payment systems form the core of the noncash payment and settlement systems used to clear and settle everyday payments made by consumers and businesses in the United States.
The fraud data were collected as part of Federal Reserve surveys of depository institutions in 2012 and 2015 and payment card networks in 2015 and 2016. The types of fraudulent payments covered in the study are those made by an unauthorized third party.
Data from the depository institutions survey show that the overall rate of payments fraud, by value, increased from 2012 to 2015 in the United States, driven primarily by card fraud.
According to the payment card networks, the rate of card fraud, by value, was nearly flat from
2015 to 2016, with the rate of in-person card fraud decreasing notably and the rate of remote card fraud increasing significantly. Even so, both surveys found that card payments fraud, at less than one-tenth of a percent of all card payments, is rare, and also represents a small fraction of the value of card payments.
Among the key findings of the depository institution survey:
- The 2015 payments fraud rate, by value, was more than 20 percent larger than in 2012, while the 2015 fraud rate, by number, was nearly 70 percent larger than in 2012
- There was an estimated 46 cents of payments fraud for every $10,000 of payments in 2015, compared to 38 cents of payments fraud for every $10,000 of payments in 2012
- The value of fraudulent card payments and automated teller machine (ATM) withdrawals rose from an estimated $4 billion in 2012 to $6.5 billion in 2015
- Card fraud, by value, accounted for more than three-fourths of noncash payments fraud in 2015, rising from less than two-thirds in 2012
- Check fraud, by value, declined to $710 million in 2015 from $1.1 billion in 2012
- The value of ACH fraud rose to $1.2 billion in 2015 from $1 billion in 2012, but the fraud rate was little changed
Data from the card network survey, which covered general-purpose credit and debit (non-prepaid and prepaid) card payments, but did not include ATM withdrawals, show that while the value of total card fraud increased, the fraud rate stabilized, recording a negligible decline from 2015 to 2016. In particular, card payments fraud increased from $7.1 billion in 2015 to $7.5 billion in 2016. The value of credit card fraud in both years was more than double that of debit card fraud, and the fraud rate for credit cards in both years was substantially higher than for debit cards.
Among the key findings of the card network survey:
- For every $10,000 of payments in 2015 and 2016, credit card fraud increased from $16.95 to $17.13, while debit card fraud decreased from $9.61 to $9.15
- The combined fraud rate of credit and debit cards declined negligibly from $13.55 for every $10,000 of payments in 2015 to $13.45 in 2016
- In-person card fraud decreased from $3.7 billion in 2015 to $2.9 billion in 2016 while remote card fraud grew from $3.4 billion to $4.6 billion
- The total number of fraudulent card payments increased from 63.5 million in 2015 to 71.4 million in 2016. Fraudulent debit card payments increased from 4.3 for every 10,000 payments in 2015 to 4.6 in 2016, while fraudulent credit card payments were flat at 11.7 for every 10,000 payments in both 2015 and 2016
- Fraud using counterfeit cards declined from $3 billion in 2015 to $2.6 billion in 2016, coinciding with a sharp increase in the use of cards with microchips for in-person payments from 2015 to 2016
- Driven by the adoption of chip card technology, the share in the value of in-person payments using a chip instead of a magnetic strip increased from 3.2 percent in 2015 to 26.4 percent in 2016
The report is a collaborative project of the Federal Reserve Board and the Federal Reserve Bank of Atlanta. It is intended to foster a better understanding of developments in the payments system, and to inform efforts to improve the U.S. payments infrastructure. The Federal Reserve will continue to collect fraud data to determine whether changes foreshadow any persistent trends.
Changes in U.S. Payments Fraud from 2012 to 2016: Evidence from the Federal Reserve Payments Study (PDF)
Federal Reserve 10/16/18 Press Release