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EBA Fraud Discussion Paper – Analysis

Fraud Discussion Paper
This report is a summary and analysis of the EBA Fraud Discussion Paper based on close reading and subsequent discussion at Member roundtables.

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The Revised Payment Services Directive (PSD2) mandates the European Banking Authority (EBA) to require the NCAs to gather and report fraud data to the EBA twice a year. In 2017, the EBA published Guidelines on fraud reporting under PSD2 to be implemented nationally, updated at the beginning of 2020. 

On 17th January 2022, the European Banking Authority published a Discussion Paper on its preliminary observations on selected payment fraud data under the Payment Services Directive (PSD2). The EBA analysed payment fraud data reported by the industry for 2019 and 2020. 

This Discussion Paper provides an overview of the preliminary patterns observed across several payment instruments, including some inconclusive patterns, which require additional analysis, and asked stakeholders to reply to questions until 19 April 2022. The EBA invited stakeholders to respond to the questions asked in the Discussion Paper.  

Summary

The European Banking Authority (EBA) paper is helpful by enabling discussion about methodology and some first insights on applying Strong Customer Authentication (SCA). EBA’s transparency in publishing this and inviting feedback is highly appreciated. 

The paper is not particularly useful in understanding Fraud in Europe or fraud within Access to Accounts (Open Banking). Nonetheless, the EBA aimed to initiate the discussions. While there are many reports about cards, there is little data about credit transfer fraud published across Europe, and this begins to address that.

EBA Discussion Paper FindingsCritique of EBA Discussion Paper
  • Credit transfer fraud is 29 times lower than card fraud. 
  • The value of credit transfer fraud is significantly higher than card fraud. 
  • Cross border credit transfers make up a third of fraudulent transactions, but 2% of the volume 
  • Fraud is higher for electronic payments than for non-electronic payments 
  • 48% of credit transfer fraud involves the manipulation of the payer. 
  • “Inconclusive patterns.” 
  • Payment service users bore 68% of the credit transfer losses, which the EBA find strange considering that PSD2 states banks should bear losses. 
  • No data was provided regarding Open Banking transactions. 
  • The paper is missing information from some countries, namely France and Germany 
  • The report lacks non-fraud data. 
  • There is a lack of consistency between the terminology and definitions of Payment Instruments in the EBA document and other industry documents. 
  • The report is missing the definitions. 
  • The document does not match the terms with real-world examples.  
  • There is no information on the fraud averages and medians. 
  • The data labelling is ambiguous. 

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