A guest post today from Annie Harrington -
Back in 2003 under a study conducted by the American Bankers Associates, some alarming data was presented. According to the study, check fraud was becoming an epidemic. Information found through the study suggested that more than 1.2 million fraudulent checks were being circulated throughout the United States. These numbers were not over the course of a year, a month or even a week, but instead in one day. Even in 2003 when the advent of the debit card was beginning to take off and check usage began to see its initial decline, fraud was still on the rise. What was worse, it was expected to grow steadily each year by about 2.5%. But now, let’s flash-forward to 2012, last year. For the first time ever that 2.5% was finally culled and instead of growing, it dropped 7.5%.
But, under the tried and true theory of checks and balances (no pun intended), when one thing falls, another must rise and rise it has. As check fraud began to die down, the United States began to notice an upswing in other kinds of fraud, mainly that related to debit and credit card. In another study conducted by the Consumer Sentinel Network (funded by the US Department of Justice) research showed that 17% of Americans have been the subject of either credit or debit card fraud. While the quickly becoming antiquated check fraud was largely tied to the writing of fraudulent checks, debit and credit card fraud has several different pitfalls to which a consumer or business can fall victim to. Here are the top five for 2012.
|Counterfeit credit cards||37%|
|Lost or stolen cards||23%|
|Account information compromised (dubious telemarketers, key-loggers etc..)||10%|
|Stolen cards through mailing fraud||7%|
|Identity theft fraud||4%|
While the initial 2003 study from AMA was true to a point, check fraud crime made its peak in 2008. In the years leading up to 2012 there was an incremental decline but nothing as large as the 7.5 drop, which marked the biggest turn in the right direction for some time. But, what can we take from these numbers? Can we take the data and make an overarching statement about fraudulent crime as it relates to card and checks?? Have increased security measures and more sophisticated technology deterred would be thieves from taking advantage of check crime or have they simply put their efforts into card related crime? It’s difficult to say.
The use of personal checks has been declining each year. More and more people are opting to pay their bills online, use a card to pay for their groceries, gas and other items. But this isn’t new, shocking news. Debit and credit cards have been being used for quite some time. Since 2012 was the first year where such a noticeable decline in check fraud was noted, most experts are waiting for the 2013 statistics to see if this will be a trend or an anomaly in fraudulent behavior.
Let’s take a look at total amounts lost across both platforms. Even at its highest peak in 2008, check fraud was nowhere near the estimated amount lost through debit and credit cards during last year’s reporting. In 2008, check fraud accounted for a little over 1.02 billion dollars in lost funds. This number is by no means a small amount, but when put up next to the amount of money lost through debit or credit card fraud, an ample $190 billion, it almost seems like chump change.
So to answer the question posed earlier, are the days of accounts being compromised and malicious financial behavior behind us? Sadly, they are not. So, for the consumer who is looking for an immediate answer with the data on their sides, it appears that checks, while quickly becoming a thing of the past, or still the more secure method of payment.
In order to combat these escalating figures card companies have teamed up to make what is referred to as the EMV initiative Cards using this technology will incorporate a small chip that will step up authentication measures, hopefully ensuring that the right person is using the right card for the right reasons. While there has been a bit of backlash among some on account of these chips violating personal freedoms the EMV movement is instead focusing on the immediate benefit that would see that 190 billion dollar black hole become just a bit smaller.
In order to entice companies over the system, the EMV initiative will cover and financial losses for the companies when a card is put into the wrong hands, a deal that is becoming very attractive to the likes of Visa and Mastercard. This protection from losses officially goes into effect in October of 2015.
Annie Harrington is a small business owner and freelance writer. She is also keenly interested in all aspects of design and the design process.