Estonia has the lowest number of cases of card fraud in the euro area

Airi Uiboaid
Eesti Pank Payment and Settlement Systems Department

A report on card fraud published by the European Central Bank shows that card fraud in the Single Euro Payments Area (SEPA)* increased by 15% in 2012 and affected around 9 million transactions worth a total of 1.3 billion euros. The number of fraudulent transactions has fallen steadily over the past five years. The number of cases in Estonia is lower than in other countries.

In 2012, 5400 fraudulent transactions worth around 900,000 euros were made using cards issued in Estonia. Although there was a slight rise of 8% in the number of fraudulent transactions in Estonia, their share in total transactions remained the same at 0.002%. Estonia had the lowest number of cases of fraud of any country in the euro area with four victims of fraud for every 1000 residents of the country, and the average value of the fraudulent transactions was 160 euros. In the SEPA as a whole there were 17 fraud cases per 1000 residents and the highest rate was in France, where there were 46 cases per 1000 residents.

ATMs saw the largest share of card frauds in Estonia with 43% of the total. There was a slight shift in the choice of channel for fraudsters from internet payments towards ATMs, and Estonia and the Netherlands stand apart from other countries in this. Card-not-present (CNP) payments, mainly online purchases, accounted for 42% of all the cases of card fraud, while the share of frauds occurring at payment terminals remained low at 15%. ATM and POS fraud was caused mainly by counterfeit fraud, mostly fake or copied cards.

The number of fraud cases involving cards issued in the SEPA rose in 2012 by 15% to 9 million transactions with a total value of 1.3 billion euros. Some 60% of these transactions were CNP transactions made online or by telephone, while 23% of cases occurred at POS terminals and 17% in ATMs. A lot more fraud was committed with credit cards than with debit cards because credit cards are used much more often for online transactions.

Counterfeit fraud is continuing to shift to countries outside the SEPA. Domestic transactions accounted for 93% of all transactions, but only 50% of fraudulent transactions, while cross-border transactions within SEPA accounted for 5% of all transactions, but 25% of fraudulent transactions. Although only 2% of all transactions were initiated from outside SEPA, they accounted for 25% of all fraud. The disproportionately high share of cross-border fraud indicates that the fraudsters are exploiting low security standards in non-SEPA countries where magnetic strip technology, which is easier to forge, is used instead of chip and PIN.

There is a wide variation in the use of cards and the number of frauds in different member states of the European Union, ranging from 18 to 253 card payments per person per year with a value ranging from 1300 euros to 18,000. The numbers for frauds similarly vary between different countries. The countries that have the smallest shares of fraudulent transactions are generally those where card transactions are less common, such as Lithuania and Hungary. The largest numbers of card frauds were in France and the United Kingdom. Estonia, Finland and Portugal have high levels of card use but low rates of fraud, which is at the same level as in countries where few card payments are made. Card fraud is less common in the euro area than in the SEPA as a whole.

d as a share of all transactions by country

As card payments in e-commerce and other online transactions increase in popularity, it becomes necessary to pay ever more attention to the security of payments. The central banks and supervisory authorities of the European Union have set minimum security requirements for online transactions which have to be put in place by payment service providers by February 2015. The central banks and supervisory authorities have already made preparations for verification of compliance with these security requirements. Fraud over the internet can be reduced with the 3D secure system and banks operating in Estonia have largely started using this system already, chiefly Verified by Visa and MasterCard SecureCode.

Fraud in ATMs and payment terminals can be reduced if more countries, including those outside the SEPA, start to guard against fake cards using the international EMV authorisation standard, where information is stored in a chip rather than a magnetic strip and the card owner is identified through a PIN code.

Card security can also be increased by cardholders themselves making sure they are aware of the risks. The transaction limits on bank cards help to restrict potential losses and cardholders can check whether their limits for daily withdrawals or transactions are appropriately set or are unnecessarily high. Estonian banks are also improving security by using anti-skimmer devices to guard against fake and copied cards, though no security solution, not even the anti-skimmer can guarantee absolute security. As criminals want to get the PIN codes of cards, they may install video cameras or fake keyboards at ATMs, so it is worth checking the input slot and the keyboard and their surrounds before inserting a card into an ATM. It is also wise to cover the keyboard from prying eyes while entering a PIN code.

* The report on card fraud covers all the countries in the Single Euro Payment Area (SEPA), which are the member states of the European Union plus Switzerland, Iceland, Liechtenstein, Norway and Monaco.

Background Information

The report by the European Central Bank and the central banks of the euro area countries on card fraud describes the trends in fraud. This is the third such report and was published on the website of the European Central Bank on 25 February 2014.

There are 1.3 bank cards per person in Estonia and 1.4 per person on average in Europe, with 189 card payments per person per year in Estonia and 103 on average in Europe. These figures put Estonia in sixth place for card use behind Sweden, Finland, Denmark, the UK and Luxembourg.

For further information:
Hanna Vaga
Public Relations Office
Eesti Pank
Tel: +372 6680 959, +372 5097 285
Email: hanna [dot] vaga [at] eestipank [dot] ee
Press enquiries: press [at] eestipank [dot] ee