First-Party Credit Card Fraud: Trends Analytics, and Prevention Strategies

  • ID: 2152765
  • June 2012
  • Mercator Advisory Group
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  • ACI
  • Detica NetReveal
  • Equifax
  • FICO
  • MasterCard
  • Opera Solutions
  • MORE

Because first-party fraud, in which borrowers apply for and use credit with no intent of paying off their loans, has historically been difficult for credit card issuers to identify as intentional acts of theft, most lenders end up writing it off as bad debt. Recently, the payment industry and vendors that serve it have been intensifying efforts to combat first-party fraud as the criminal underworld exploits vulnerabilities in the banking and credit card system. Issuers have incorporated fraud prevention technologies to identify fraud rings and activity, weed out bad accounts, and respond with greater insight to cases of potential first-party fraud.

Mercator Advisory Group's new report, ‘First-Party Credit Card Fraud: Trends, Analytics, and Prevention Strategies’, examines first-party fraud by reviewing current market statistics on credit card fraud from a number of industry participants and national reporting bodies. The report presents credit quality data and discusses the type of environment that fosters first-party fraud.

Also included is Mercator Advisory Group's estimate of the scope of the first-party credit card fraud problem in the United States. The READ MORE >

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  • ACI
  • Detica NetReveal
  • Equifax
  • FICO
  • MasterCard
  • Opera Solutions
  • MORE

Executive Summary
The Credit Card Fraud and Risk Landscape

Credit Card Fraud Trends: Where's First-Party Fraud?
First-Party Fraud Is Difficult to Identify
U.S. Charge-offs and Delinquencies Stabilizing
Sometimes Desperate People Do Desperate Things
U.S. Credit Scores Improving (Sort of)
First-Party Fraud Is a Large Percentage of Bad Debt
Identification Strategies, Tools, and Analytics for Combating First-Party Fraud
First-Party Fraud Targets More than Credit

Identification of Mules, Command and Control, and Collusive Merchants

Analytics: From Bureaus to Big Data
Vendor Profile: NICE Actimize
Vendor Profile: Palantir Technologies
Vendor Profile: Transaction Network Services


Classification of First-Party Fraud vs. Bad Debt
The Need for More Transparent Reporting
Privacy Issues Concerning Use of Big Data and Other External Sources for Fraud Control

Copyright Notice
End Note
Figures and Tables

Table 1: Selected Payment Card Fraud Statistics, 2010 - 2011

Figure 1: Card Fraud in the United Kingdom, 2001 - 2011
Figure 2: Credit Card Fraud in France, 2003 - 2010
Figure 3: Credit and Charge Card Fraud in Australia, 2006 - 2011
Figure 4: U.S. Quarterly Credit Card Delinquencies and Charge-offs, and Net Employment Change, 2006 - 2011
Figure 5: FICO Score Distribution in the U.S., 2005 - 2011
Figure 6: Change in FICO Score Tier and Segment Population from 2005 to 2011
Figure 7: Card Issuer Charge-offs and Fraud Losses in the U.S. by Reason/Type, 2011E
Figure 8: Customer Data Sources of a U.K. Credit Bureau
Figure 9: Palantir - Analytics for Fraud Management

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- CyberSource
- Detica NetReveal
- Early Warning Services
- Equifax
- Experian
- Intuit
- MasterCard
- NICE Actimize
- Opera Solutions
- Palantir Technologies
- PayPal
- Square
- Transaction Network Services
- Visa

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