Is There Really Safety In Numbers?

In a week where FICO has published its interactive fraud map showing how European card fraud has changed over the last 5 years, and reflected on the considerable reductions across the UK card fraud market, there was a cautionary tale issued by the mass media. The Guardian has published an...

How European card fraud has changed

American philosopher George Santayana is credited with saying that those who don’t remember the past are condemned to repeat it. Today, FICO released an interactive fraud map showing how card fraud has changed over the last 5 years across Europe. While many of these trends have been previously observed, comparing...

Death to the Mag Stripe?

Transaction World Magazine just published an article by FICO blog author Doug Clare, "EMV: The Gold Standard 'Over There.' Does it Spell Death to the Mag Stripe?" In the article, Doug discusses EMV adoption for cards in Europe and the U.S., and how this standard is superior to the traditional...

Call for Entries: FICO Decision Management Awards

We've just announced a call for entries in the second FICO Decision Management Awards. The awards honor FICO clients that have achieved outstanding results from their use of analytics and decision management technology to grow their businesses, manage risk and reduce costs. Nominations are due August 1, 2012, and winners...

Big Data Changes the Analytics Paradigm

Big Data is a hot topic today that stems back to the early days of high-performance computing and parallel computing, which I worked on during my time in theoretical physics at Duke and Los Alamos. These days, Big Data tools facilitate the ease in applying these concepts. Interestingly, much of...

Mobile Opens the Door for Better Fraud Detection

Mobile banking services will become increasingly important to consumers, as more and more adopt smartphones and use them to stay in touch with their personal financial pictures. My colleague Paul Swyny recently blogged about the growing opportunity to leverage mobile communications in banking. In particular, we're finding the mobile channel...

Using Mobile Technology to Improve Customer Interactions

Even lenders with the best analytics and decision management platforms often struggle to communicate advice and offers to customers. Wouldn't it be great if they could do so via a low-cost channel that their customers actually enjoy using, and thus is likely to yield more and higher-quality responses? Together with...

New Defense Fights Bank Robbery

BankInfoSecurity has published an article and podcast that feature FBI Special Agent Erik Vasys discussing work with FICO on Bandit Shield, their new anti-bank robbery initiative. Here's an excerpt from the article: Bank robberies are old-world crimes, but they are still devastating to institutions and their communities. How is the...

Don’t forget about low-tech fraud

In today’s fast-paced world of electronic crime and scams, we often focus on large-scale card fraud attacks, perpetrated by criminals who employ sophisticated technology to steal large amounts of personal and financial data. These thieves are highly proficient at exploiting technology that allows them to reap sizeable financial rewards while...

Fraud vs. Customer Impact—A Tricky Balancing Act

I recently returned from giving the keynote address at the 2012 Financial Cryptography and Data Security conference. The event draws crypto/data security/privacy experts, researchers, and practitioners across the world to focus on the latest advances in this space. During this week-long deep technical conference, a central theme was how to...

Cybercops & robbers: Digital posses to bust bank bandits

FoxNews.com has covered recent news on joint anti-crime efforts between FICO and the FBI Bandit Shield program, quoting FICO fraud blogger John Buzzard. Here's an excerpt: Bank robbers lost their cool when six-guns went out of style, but they’re still just as dangerous: In 2010 alone, 90 people were taken...

Web Banking Fraud Actually in Decline

American Banker recently published an article on the decline in internet banking fraud losses and the emerging threat of first-party fraud. FICO fraud experts, including fraud blogger Brian Kinch, are quoted. Here's an excerpt: Most of the recent attention in fraud technology has been on third-party fraud. The most common...

Partnering with the FBI to fight fraud

Exciting news on the fraud front—we’ve just joined forces with the FBI on new anti-crime efforts. FICO’s online fraud forum http://www.fraudalertnetwork.com/ will soon host an FBI discussion area on subjects like current bank robbery investigations and electronic financial crimes. These discussions tie into the FBI's Bandit Shield program, which brings...

Enterprise fraud: It's all about relationships

Remember the shock of hearing Darth Vader tell Luke Skywalker, “I am your father”? That’s pretty much the worst-case scenario for a family meeting. Many people have a similar shock when they discover that they need to tell their own bank about their relationships with it. Like Luke, the bank...

The hidden face of first-party fraud

FICO and Equifax convened a meeting with card and banking industry fraud experts on 23rd February to talk about new approaches needed to the mounting threats presented by, particularly, first-party fraud across the credit lifecycle and third party fraud at applications stage. The site was appropriate: the St James's Hotel...

Making cards less vulnerable to fraud (CBS video)

In the video below, CBS 5 San Francisco interviews FICO fraud expert and blogger Doug Clare in a segment on chip (smart) cards. Doug explains why these cards are less vulnerable to fraud than magnetic stripe debit and credit cards, and the challenges for adoption in the US. If you...

The hidden cost of free WiFi

Free WiFi is now a given in many public spaces such as coffee shops, airports and hotel lobbies. Most people don’t think twice about quickly accessing an open network, even to check a bank balance or pay a bill. But appearances can be deceiving, and not all networks are legitimate....

Enterprise Fraud Management - The Final Frontier?

Most people who hear the word “enterprise” think Star Trek. In business circles, the term has been over-used to the point where it’s lost meaning. But when it comes to fraud management, the enterprise approach is gaining importance, not losing it. The reason is that fraudsters, recognizing that consumers will...

Fraudsters refocus on retail POS

2011 was transitional year for card and PIN skimming. High-profile PIN points of compromises at a major US craft store chain and a popular Northern California grocery chain brought our focus back to point-of-sale (POS) terminals at retail locations. Previously in 2010, financial institutions struggled with increases in card skimming...

Sharp drop in European counterfeit card fraud

A recent blog post commented on the opportunity for the US to adopt chip and PIN technology to fight fraud. For a great endorsement of the benefits, you only need to look at today’s news release from FICO on fraud patterns seen in Europe. By studying 55 million active European...

Chip and PIN in the US?

For years, UK banks and their customers have had a leg up on Americans when it comes to avoiding certain common types of payment card fraud. Credit and debit cards with embedded microchips, standard in the UK and several other European countries, significantly enhance fraud prevention over traditional magnetic stripe...

Celebrating fraud innovation

I'm proud to announce that FICO® Falcon® Fraud Manager 6 Analytics was named a finalist in the CONNECT Most Innovative New Product Awards, in the software category. This accolade was driven by the analytic innovations that I often blog about here, including: Adaptive Analytics, which are reducing account false positive...

Peru poised for banking growth

After decades of very low banking penetration, the Peruvian banking market appears to be poised for growth. Up to now, around 70% of Peruvians have been outside of the official banking system, making banking penetration one of the lowest in Latin America. Why? Few have a regular job, and most...

Mobile Fraud: Q&A with Aite Group

As financial crime continues to expand and evolve, FICO interviewed Aite Group fraud analyst Julie Conroy McNelley about emerging threats in mobile banking security. Julie recently participated on the FICO World analyst panel on “Enterprise Fraud Management” and just published “Mobile Fraud: The Next Frontier,” a report based on Aite’s...

Analytics for more profitable originations

One way FICO clients are boosting profits in originations is by using analytics that provide critical insights into a wider range of factors affecting the performance of new accounts. Here are three key areas where we've found analytics can sharpen origination decisions: 1. Macro-economic impacts on credit risk Analytics can...

Mixed news on fraud in Brazil

During an October seminar about Electronic Crimes and Methods of Protection, the Federation of Goods, Services, and Tourism of the State of São Paulo (Fecomercio-SP) shared grim news on the state of electronic fraud in Brazil. A survey by the agency, which consists of retailers and service companies in the...

Fighting Enterprise Fraud

Increasingly banks are looking to leverage the full breadth of data related to customers to make better decisions, and fraud is no exception. There is a strong desire to break down silos, so fraud/risk behaviors in one area of the customer’s interaction with the bank can be utilized in other...

New Analytics for Emerging Payments

Payment cards are changing. Whereas a plastic card used to access a single funding account, now we increasingly see cards—and very soon, mobile phones—that can access multiple funding accounts. This trend not only increases personalization options, but also fraud detection capabilities, if you leverage a cardholder’s history of what funding...

Electronic fraud on the rise in Brazil

The Brazilian Banks Federation (Febraban) recently released data from a survey revealing that losses caused by electronic fraud are on the rise. These losses totaled R$ 685 million (US$ 460 million) from January to June this year, up from R$ 504 million (US$ 340 million) for the same period last...

Changing payments means changing fraud detection

The traditional credit/debit card has become passé—at least in terms of having a single device with access to only one funding account. Today, a single card can, at the point of sale, access different accounts to fund the payment transaction. Likewise, a mobile device has the capability to make payments...

Closing the Gap on Fraud Model Degradation

Fraudsters are continually adjusting their strategies to circumvent fraud detection systems. In my last few posts, I've been discussing how adaptive analytics are built to counter this problem. Because of this, the latest version of FICO™ Falcon® Fraud Manager leverages adaptive analytics. The adaptive model adjusts the base neural network...

FICO fraud chief discusses mobile banking fraud on Bank Info Security

Bank Info Security has published a bylined article on mobile banking fraud by FICO fraud chief and blog author Mike Urban. In the article, Mike discusses points of vulnerability, as well as security and detection measures. Here's an excerpt: For today's retail banks, mobile banking is seen as table stakes,...

Strengthening conventional fraud detection

Financial institutions are always looking for ways to combat newer fraud schemes—schemes that arise between fraud model developments and are not well-represented in the historical data. As I discussed in a recent post, one way to boost performance is to add analytics that are adaptive or self-learning. Deploying adaptive models...

How can fraud models combat new tricks?

The fight against payment card fraud resembles an arms race. Card issuers are deploying ever more sophisticated anti-fraud measures, and fraudsters are continually evolving strategies to evade those measures. Typically, issuers rely upon neural network fraud models trained on huge historical datasets to recognize recurring fraud patterns and reduce fraud...

Mark Greene: Join us for FICO World 2011 (video)

How are the top competitors in banking worldwide changing the game to grow in a difficult economy? FICO CEO Mark Greene invites you to discover the answers at FICO World 2011, November 1-4 in New York. Mark Greene: Discover Game Changers at FICO World 2011 Attendees will join hundreds of...

Rich Pickings for Fraudsters

Recently, an unidentified customer took out $400 from a Capital One bank in the Hamptons in New York and left behind his receipt showing an available balance of $100m. The receipt was considered suitable novelty value by the person who picked it up, who then posted it via a financial...

UK Tackles Bribery and Corruption

Effective as of 1 July 2011, Britain saw a brand new Bribery Act come into force. Wide-ranging powers were provided to the Serious Fraud Office (SFO), now required to investigate and prosecute offences, even for companies not based in the UK but doing business on its shores. Business entertainment and...

Closing the Voters’ Roll Fraud Loophole

Fraud consultants at FICO have warmly welcomed the announcement on 30th June 2011 by Mark Harper, the British minister for political and constitutional reform, to change the process by which households register to vote in the UK. Currently households register as one to vote, which has allowed people to be...

Mobile Banking Fraud Part #2: Fraud Detection Essentials

In an earlier post, I discussed vulnerabilities associated with mobile devices that drive up fraud risk for banking and payments made through these devices. These range from malicious apps, to network security issues, to targeted man in the middle attacks. So, what can be done to counteract these vulnerabilities? One...

Mobile Banking Fraud Part #1: Vulnerabilities of Mobile Devices

Mobile devices are changing the payments landscape. More mobile devices are becoming equipped with near-field contactless capabilities and apps that allow for the purchasing of goods and services. While this provides a number of conveniences for consumers, mobiles also come with greatly increased risks related to payments. Case in point,...

Which fraud investments will deliver the biggest payoff?

Criminals are making lots of investments in fraud, so it's critical that financial institutions get the biggest bang for their anti-fraud buck. Here are the areas I suggest investigating for anti-fraud ROI: 1. Make more stringent CNP (card-not-present) authorizations. With the increased usage of cards on the internet and the...

Four essentials for fraud detection

I'm often asked "What are the best ways for banking institutions to detect fraud?" While it's common for institutions to rely on after-the-fact manual reports and threshold rules, these are primarily useful for compliance processes, not for fraud detection and loss mitigation. To have a real impact on fraud losses,...

Q&A: Dodd-Frank Amendment Could Impact Fraud

In an interview with GovInfoSecurity.com, FICO blog author and fraud expert Mike Urban spoke about the Durbin Amendment and its impact on fraud. Here's an excerpt: The highly debated proposal from Sen. Dick Durbin, D-Ill., would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act by significantly reducing interchange...

The growth and evolution of ACH/wire fraud

Fraud on Automated Clearing House (ACH) payments has gone through an evolution. It started out with fraudsters getting involved as originators of fraudulent ACH transactions. They would create fictitious transactions, either by not getting consumer consent or over-charging consumers on transactions. A heightened awareness of on-boarding originating businesses and escalated...

The hidden cost of fraud

Traditionally, fraud losses are measured by looking at fraud transaction dollar losses and operational costs. But institutions should begin to pay more attention to reputation and loss of confidence—often the “hidden” costs of fraud. While it's true that these costs are less obvious and harder to measure, that doesn't mean...

Defining what makes a “good” model

Central to developing and evaluating an analytic model is the definition of what constitutes a “good model.” At FICO, we view it as the dimensions of good. Let’s take fraud models as an example. What makes one model look high-performing may be misleading if that performance degrades quickly. A model...

Cross-channel fraud – a problem for Asia Pacific, too

Fraud is a hot topic on this blog. I was particularly intrigued by what my colleague Mike Urban had to say on the emerging threat of cross-channel fraud. In our work with banks in Singapore and around Asia Pacific, we see that bank fraud continues to escalate, posing a costly...

First-Party Fraud - the Hidden Part of the Iceberg

Banks have been dealing successfully with third-party fraud for decades — today’s report on the low rates of card fraud in the UK bears this out — but there is another side to fraud: first-party fraud. First-party fraud represents the hidden part of the iceberg, and it can sink your...

Phishers Cast Their Nets Across the Social Networks

Fraudsters looking to harvest personal information to support their methodical attacks on online bank accounts have begun turning their attentions to the proliferation of data unwittingly or naively provided “in the clear” on social network profiles. People are listing their names, addresses, dates of birth, family, residence, work and even...

Why managing cross-channel fraud is a must

Our recent fraud survey of hundreds of financial institutions uncovered that only 26% have a team assigned to detect cross-channel fraud. The problem stems from how institutions manage fraud—by payment channel rather than at the customer level. This makes them vulnerable, unable to identify fraudsters targeting one channel for compromise...

What are the biggest fraud threats for 2011?

The new year often brings new resolutions, new ideas and fresh perspectives. Unfortunately, fraudsters are not immune, and will also come up with new schemes and deceptions. So what can banks expect from fraudsters in the coming year? The increased use of electronic deposits means that Remote Deposit Capture (RDC)...

New survey reveals top fraud threats and vulnerabilities

What are the top fraud threats to financial institutions? How are they fighting back? New results from our Faces of Fraud Survey provides some answers—and a few surprises. The survey, conducted by ISMG and sponsored by FICO, polled hundreds of financial institutions, primarily banks but also credit unions and payment...

100 patents that changed banking

FICO has just hit a major innovation milestone — we have now been granted 100 patents over the past 20 years. You can read the news release and watch a FICO Tech Talk, but I’d also like to point out the significance of these patents in financial services alone. These...

Has Chip and Pin Cracked the Fraud Nut?

Card fraud trends in the UK are beginning to show the sort of results that validate those who have held up “chip and PIN” as a modern-day success story. At the FICO Forum: The New Normal in London on 16th November, we had a lively discussion about the lowest UK...

Fraud as a Moment of Truth

If you have ever had a fraud perpetrated against your card or bank account, or if you have ever been stopped from accessing your accounts or making a purchase, then you will know that this is an emotive experience. Past research has revealed that, managed poorly, as many as 1...

Fraud, the second oldest profession in the world?

Fraud, the second oldest profession in the world?

We all know the oldest profession in the world, but do fraud and forgery run a close second?

Consider this, in the ancient world, it was not uncommon for the people working at the forge to duplicate coins by using gold plated bronze and not pure gold. Augustus Caesar and other rulers of the day were quick to see the implications and imposed heavy penalties, often death. Yet, fraudsters are opportunistic and will find ways to succeed. And so fraud has continued.

Today with the advent of cards as the means to facilitate the purchase of goods and transactions, forged coins have been replaced by counterfeit cards. And how the fraud is committed is different. Fraud on cards today is committed electronically. In country and across borders. Anywhere in the world.

In Asia Pacific (excluding Japan), we estimate card fraud totals more than $350 million U.S. dollars a year and on the increase. The most common form of card fraud is counterfeit cards. Handheld skimmers are easy to pocket and use, and the skimming can happen anywhere, any time and any place, even at a merchant where the transaction is taking place.

Armed with confidential data that has been skimmed, a fraudster can make card not present (CNP) purchases online without running the risk of identification.

CNP is the fastest growing fraud in Asia of late, having increased by 50 percent from 2008 to 2009 in Australia alone. In fact, we predict that as mobile devices and smartphones become prevalent for online purchases, CNP types of fraud will surpass counterfeit card fraud.

It’s ironic that one of the major drivers of CNP fraud was the introduction of the chip-based card, which began in the UK and has migrated here to Japan and Malaysia. Fraudsters, knowing very well that chip cards are all but impossible to clone, have moved online to CNP type fraud. One recent example is the Jakarta Starbucks employee who collected the data from card receipts and used them to buy iPods and iPhones.

This also happened to a client of FICO’s here in Asia Pacific. The bank introduced chips to their debit and credit cards but then saw an increase in CNP fraud. We worked with this customer to adjust their score threshold; the total amount of fraud detected increased by 143 percent.

Fraud is a moving target. Fraudsters are always on the lookout for loopholes within the system. They move to where there are new products or channels, and they move from country to country where there are not yet strict protective measures in place.

So what can Asian banks and consumers do?

Banks can mitigate fraud risk through technology that can predicts fraudster behavior more accurately and faster. Hence the increasing adoption of automated fraud detection systems with rules, models and neural networks in Asia, which not only can handle large volumes of transactions but can more accurately detect whether each transaction is fraudulent. Our fraud systems protect 1.8 billion card accounts worldwide, including forward-thinking top banks in Asia Pacific.

Perhaps Emperor Augustus had it right a millennium ago, implementing severe forms of punishment for fraudsters. Today, fraudsters don’t need to fight lions in the Roman stadium, but banks need to ensure they educate their customers and have strong lines of defense. If they find themselves the weakest link, they can guarantee fraudsters will attack.

ATM card compromises…Just the facts

In a recent post, I discussed the recent rise in card compromises resulting from attacks on bank ATMs. Did you know that… The time delay from ATM skimming to unauthorized withdrawals/purchases has decreased from about 30 days in 1999 to mere hours in 2010? Factory-installed ATM cameras can easily be...

Bank ATMs attract resurgent fraudster interest

Constant vigilance must always be the mantra of the fraud manager—you never know when or where the next threat will arise. Case in point: We’re now seeing an abrupt rise in the incidence of card compromises resulting from attacks on bank ATMs. This trend became evident in the third quarter...

Vishing, SMiShing, Phishing, Pharming, Whaling, Spearing… Call it what it is: Social Engineering

Social engineering has been with us as long as humans have been on the planet. We respond to social stimuli all around us every day. From getting cut off by an aggressive driver to losing money due to a fraud event, even the most even-keeled person will get agitated. Social...

Smart Phone Insecurity

There have been increasing reports of intentional and unintentional data compromises associated with smart phones. A smart phone is basically a small computer. Apple has already taken this metaphor to the next step with the release of the iPad, which uses the iPhone operating system. Each smart phone operating system...