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South African card fraud trends & risky consumer behavior

South African Card Fraud Trends & Risky Consumer Behavior

In conjunction with the PASA International Payments Conference this week, we decided to take a look at some recent consumer fraud data from the host nation, South Africa. The market is very similar to the global averages, in that a shockingly high number of consumers continue to experience card fraud. Despite the number of fraud attacks and breaches, consumers in South Africa continue to engage in risky behavior such as providing information in phishing attempts and writing down their PIN numbers.

  • Of all cardholders—debit, credit, and prepaid—33% have experienced card fraud in the past five years, a significant (and rising) number. This number was 30% in 2014, highlighting a slight uptick in fraud.
  • After experiencing fraud, 41% of consumers exhibit “back of the wallet” behavior and use the replacement card less than they used their previous card. Although this number is steady from 2014, and in line with global averages, this is still a high number and represents potential lost revenue for financial institutions.
  • Consumers dissatisfied with how they’re treated by their financial institution after experiencing fraud sometimes change providers, resulting in an attrition rate of 16%. This highlights the importance of after-care following a fraud experience.
  • 16% of South African consumers lack confidence that their financial institution can protect them against fraud. This has decreased slightly from 15% in 2014.
  • 54% of South African consumers exhibit at least one risky behavior, which puts them at higher risk of financial fraud. Consumer education about risky behaviors and combating/reducing reduce fraud rates is sorely needed – how to help consumers help themselves.

South Africa

Global

Experienced fraud in the last five years

33%

30%

Consumers who use their replacement card less

41%

40%

Consumers who left their FI after a fraud event

16%

20%

Consumers who lack confidence in the FI to protect them against fraud

16%

14%

Consumers who engage in risky behavior

54%

54%

The data tells us that fraud continues to be a problem in South Africa and in many other countries, potentially putting a damper on consumer confidence in merchants and eCommerce sites. And much like their global counterparts, South African consumers still engage in risky behavior.  There are early indications of a growing fraud problem when compared with 2014, and if this continues, there will be significant impacts on the marketplace with financial institutions seeing a loss of revenue and an increase in customer churn.