Key Insights from the EBA’s 2024 Payment Fraud Report

For fraud prevention teams at banks, particularly those operating within the European Economic Area (EEA), this report serves as both a validation of the robust measures already in place and a call to action to address the evolving fraud landscape. The findings underscore the effectiveness of Strong Customer Authentication (SCA), implemented under the revised Payment Services Directive (PSD2), as a cornerstone of modern fraud prevention.

However, the report also reveals inconsistent fraud losses across the EEA.

Key Insights: The Role of SCA in Reducing Payment Fraud

The report reveals several critical insights that are essential for financial institutions aiming to bolster their fraud prevention strategies:

The Success of Strong Customer Authentication (SCA)

The report demonstrates that SCA has played a pivotal role in reducing fraud rates, especially in card payments. Transactions authenticated through SCA exhibited significantly lower fraud rates compared to non-SCA transactions. This is a testament to the success of the SCA regulations under PSD2, which have been rigorously implemented across the EU.

Challenges in Cross-Border Transactions

While the overall impact of SCA has been positive, the report highlights a significant challenge in cross-border transactions, particularly those involving countries outside the EEA where SCA compliance is not mandatory. Fraud rates for these transactions were notably higher—up to ten times more—underscoring the need for enhanced security measures in international payment processing.

Variability in Fraud Losses

The distribution of fraud losses varied significantly depending on the payment method and the region. A large portion of card fraud (71% of the total value in the first half of 2023) and a substantial share of credit transfer and direct debit fraud (43% and 47%, respectively) were linked to cross-border transactions. This variability indicates that while SCA is effective, its benefits are unevenly distributed, necessitating a more tailored approach to payment fraud prevention.

Inconsistent Data Reporting

One of the report’s critical findings is the inconsistency in data reporting across different countries. The report’s inaugural nature and the varying data quality make it difficult to compare countries robustly. This inconsistency underscores the need for a more standardized data collection and reporting approach to assess and respond to fraud trends accurately.

Per Capita Losses Vary by Payment Type, Country

Feedzai’s analysis of EBA data also finds notable differences in how different fraud types impact different countries. On a per capita basis, some countries face higher losses than others in terms of value and volume. Our analysis found that most countries experience an average loss of 10 euros per capita.

The Czech Republic, for example, showed higher per capita losses in terms of payment card value and volume. Credit transfer losses were also higher per capita than in other EU nations.

In France and Spain, card fraud volume per capita is considerably greater relative to the value of fraud losses. This suggests fraudsters are adopting different tactics by targeting victims more frequently but in smaller amounts to avoid getting caught.

Card fraud by volume was also higher per capita in several other nations than average, including France, Ireland, Lithuania, and Luxembourg. The Netherlands also outpaced the Czech Republic in credit transfer fraud volume per capita.

These findings indicate that certain types of fraud are more prevalent in different nations. Each nation must assess the most pervasive fraud type within its borders and implement the necessary prevention measures.

Actionable Strategies for Banks

Based on the findings of the EBA report, here are several actionable strategies that banks can implement to strengthen their fraud prevention efforts:

Expand the Use of SCA Beyond the EEA

Given the higher fraud rates in cross-border transactions, banks should advocate for the broader adoption of SCA principles internationally. Additionally, they should collaborate with global partners to extend the reach of SCA protections, particularly in regions where these measures are optional.

Enhance Cross-Border Fraud Detection

To address the vulnerabilities in cross-border transactions, banks should invest in advanced fraud detection systems that leverage real-time analytics. These systems can identify and mitigate risks associated with transactions from non-EEA countries, reducing the potential for fraud.

Standardize Data Reporting

To overcome the challenges posed by inconsistent data, banks should work towards adopting standardized reporting protocols. This will improve the accuracy of fraud data and enable more effective comparisons and trend analyses across different regions.

Focus on High-Risk Payment Methods

The report indicates that credit transfers and card payments, particularly those involving large sums, are at higher risk of fraud. Banks should prioritize these payment methods in their fraud detection and prevention strategies, implementing additional security measures and monitoring systems to protect against fraudulent transactions.

A Positive Outlook with Continued Vigilance

The EBA’s 2024 Payment Fraud Report offers a positive outlook for the future of fraud prevention, particularly with the widespread adoption of SCA under PSD2. However, the report also highlights areas where continued vigilance is necessary, especially in cross-border transactions and data reporting.

As fraudsters continue to evolve, so too must the strategies employed by financial institutions. By embracing the insights and recommendations from this report, banks can safeguard their operations and position themselves as leaders in the fight against payment fraud.