Last year we witnessed dramatic changes to the ways we work, socialize and consume. For those of us who work in payments, one major change happened rapidly, namely the widespread switch from cash to card or e-wallet payments, particularly contactless payments.
While experts stated that transmission of the COVID-19 virus through notes and coins was minimal, many consumers and retailers decided it was not worth the risk and pivoted to using their bank cards and phones to make everyday purchases. In the UK, card payments were 75.3% higher in early April 2020 compared with a year earlier, while contactless payment limits also rose to $100, making the switch to contactless even more appealing.
Unfortunately, this rapid change has been overshadowed by increased levels of fraud, and, according to our research, one of last year’s most noticeable trends was the rise in swapped-card fraud: the act of stealing a card and then replacing it so that the victim is unaware that anything is amiss. Usually, the stolen card is replaced by either a counterfeit card or another stolen card. National lockdowns created a unique situation where card transactions have increased, but card-present transactions have "temporarily" decreased, with levels of fraud mirroring those payment preferences. In the consumer market, we have yet to see whether swapped-card or indeed all card-present fraud levels will rise again as restrictions begin to be lifted.
However, what we can say with confidence is that swapped-card fraud has and will continue to affect specific card industries. For example, industries which operate on a closed network are more likely to be hit than consumer or bank cards. The rise of EMV, potentially accelerated by the increase in card payments, will also make certain types of consumer fraud much harder to achieve —
potentially pushing fraudsters toward easier targets. Indeed, current data shows a rise in fraud for those industries where cards are not up to date with the latest contactless or EMV technology. That includes where card-present payments are not just the norm, but remain a mandatory requirement.
Our data shows that the current rise in swapped card fraud has had the most pronounced effect on industry-specific card payments, such as fuel cards. This comes down to several reasons, but one factor affecting the fuel card sector stands out: Most truck drivers have been granted key-worker status by many governments across the world, meaning that fuel card transactions and fuel card fraud have continued to grow during lockdown, and have been largely unaffected by travel restrictions.
The extensive use of unmanned fuel sites in Northern Europe has meant that these areas are more susceptible to stolen card fraud —
either via collusion with drivers or for vehicle break-ins. Current predictions in the fuel card industry estimate that by the end of 2020 there will be a 364% increase in the dollar value of swapped fuel card fraud cases. By September 2020, there had already been three times as many recorded cases of swapped-card fraud as there had been during the whole of the previous year (2019). This is likely to be a result of the reduced presence of staff at these sites during lockdown and reduced staffing levels elsewhere, as most of the incidents in 2020 occurred when national and regional lockdowns were at their most severe.
Swapped-card fraud accounted for just 1% of fuel card fraud losses in 2019, versus 10% of total fraud in 2020. Conversely, traditional copied-card fraud and skimmed-card fraud declined in 2020 due to the increased use of contactless payments and lower use of ATMs, which made it harder to copy or skim the data from a card.
The data clearly shows a change in the way fraudsters are thinking and adapting. That said, in my view, swapped card fraud has been "allowed" to rise, due to a lack of awareness of the risks among target users. The global pandemic has meant that card payments have increased, and therefore card fraud types such as swapped, copied and skimmed have all increased. The push by many retailers to only accept card payments has also not been matched by the required investment in security. The fuel card industry and many other closed-loop card systems need to pay close attention to this issue.
At the fuel card industry level, while some of the fuel card suppliers in Europe have adopted EMV, in markets where chip card payments have seen longer integration plans, it may spur on the adoption of improved technology to reduce fraud. Certainly, in the U.S. there has been a move to update pumps and suppliers to make them EMV-compliant, and with the rise in card payments and adapted fraud schemes, that may prove to be the catalyst for any remaining card providers to adopt these methods to reduce risk.
