Magazine article American Banker

Visa, MasterCard Fraud Losses Down for 2d Year in Row

Magazine article American Banker

Visa, MasterCard Fraud Losses Down for 2d Year in Row

Article excerpt

Credit card fraud declined in 1994 for the second straight year, according to Visa International and MasterCard International.

The card associations attributed the decline in fraud losses as a percentage of total sales to the continued success of technology like neural networks and enhanced card security features.

The recent improvements came after a period of steady growth in fraud losses - six consecutive years for New York-based MasterCard and 10 years for San Francisco-based Visa.

There are two ways of measuring fraud losses. The industry preference is to report fraud as a percentage of sales volume, but actual dollar losses are also meaningful.

As a percentage of sales volume, MasterCard's worldwide fraud dipped by 11.4%, to 0.125%; Visa's, by 20.9%, to 0.102%.

MasterCard's dollar losses last year totaled $486 million - $34 million greater than in 1993. The dollar increase was due to the association's robust 26.1% growth in sales volume, to $389.9 billion - even better than the previous year's 24.2% growth, to $320.6 billion.

Visa's 1994 sales volume grew at a lesser rate - 21.6%, to $630.7 billion - so its fraud losses totaled $645 million, down from $655 million in 1993.

Minimizing fraud's drain on the industry, MasterCard said its losses last year were more than 12 cents on every $100 of sales volume.

Mirroring 1993's results, both bank card associations reported the greatest decline in fraud on cards issued by banks but never received by the cardholder.

Visa and MasterCard reported 28% and 20% decreases, respectively.

Among the other three major categories of fraud, which are mail/telephone orders, lost or stolen cards, and counterfeit cards, the latter is still a greater problem for MasterCard than for Visa.

In 1993, MasterCard's counterfeit losses rose 75%; Visa's, 10.1%. Last year, MasterCard narrowed its counterfeit losses but still reported a 24. …

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