The ‘return to normal’ from the pandemic in 2021 was uneven across the continent due to variances in vaccine rollout, resurgence of Covid infections, and policies regarding retail, travel and tourism.
Only four countries improved their card fraud performance in 2021, which is a great achievement within the context of such economic uncertainty.
The majority of countries have either remained stable or experienced increases in fraud losses. The most notable of these are Portugal and the Netherlands, both with incremental losses exceeding +15%.
As reported yesterday, the United Kingdom and the Nordic region continue to lead Europe both in terms of digital transformation and fraud loss reduction, with Denmark and Sweden achieving the highest percentage decreases in losses.
Payment fraud on digital channels emerged as the primary fraud threat within many countries, overtaking card fraud losses. FICO expect that Central and Eastern Europe could see similar trends in the coming years as more payment providers and real-time payment platforms are introduced across the region.
Polarised Performance Across Europe
Total losses across Europe have remained stable from 2020 through to 2021, with the UK and Nordics’ reductions being offset by loss increases across the region.
In 2020, France, Poland and Germany experienced €6 million, €5 million, and €3 million fraud loss increases respectively, yet in 2021 France held a flat trend but Poland and Germany saw increases for a second consecutive year, with €0.5 million and €2.4 million fraud loss increases, respectively.
The Netherlands experienced the highest losses in terms of relative value, coming in with a loss increase of over €8 million.
France was among the countries that managed to maintain their performance, with the group accounting for 30% of the countries studied: the Czech Republic, Spain, Italy, Norway and Ukraine all managed to keep 2021 losses within 0-1% of their 2020 performance.
The Story in Basis Points
Reviewing fraud threat in basis points shows the level of fraud attack across the European region. In 2021, the level of attack increased across the board from 2020.
Interestingly, the top performers in the region in terms of overall fraud performance (the United Kingdom, Denmark and Sweden) have had the smallest increase in terms of overall card fraud threat, with Denmark the only country to see a reduction in threat levels (from 3.3 basis points in 2020 to 2.1 in 2021).
Sweden had an increase of 14% and the United Kingdom’s threat level measured in basis points increased by 32% from 2020 to 2021.
Whilst the United Kingdom and France had the highest basis points in both 2020 and 2021, the threat levels in other countries have increased at an alarming rate over the last year.
Fraud basis points in Germany, Greece and the Netherlands increased by 522%, 596% and 602% respectively.
The Netherlands had the highest increase in losses in terms of relative value (€8 million+) in 2021; however, it is commendable that damages were limited to only an 18% increase in light of the 600%+ increase in overall threat.
Overall, the story in basis points is extremely concerning. Whilst the overall performance trend for Europe may be flat, this is testament to the fraud management efforts of the financial institutions across the region, rather than an indication that the threat is remaining steady or slowly going away.
The basis points tell us that the fraud threat level (the ratio of fraud losses to card sales) doubled in 2021.
Payments fraud is also increasing exponentially, which further highlights the need for enterprise fraud management capabilities in addition to a cross-industry approach to prevent losses escalating in 2022.
Fraud basis points is a standard measure of card fraud severity, and can show how a bank or a country compares to others. 1 basis point is equivalent to 1% €100. It works the same in any currency and provides an indicator of the fraud-to-sales ratio.
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