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The security of retail payment instruments: evidence from supervisory data

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  • Massimiliano Cologgi

    (Bank of Italy)

Abstract

This paper provides an overview of retail payments security and assesses the impact of the new strong customer authentication (SCA) requirements introduced by the revised Payment Services Directive (PSD2) on the security of remote payments. For each payment instrument, we construct aggregate risk indicators and compare the security of domestic and cross-border payments, as well as of payments made remotely and at the physical point of sale. Using a model for panel data, we estimate that SCA reduces the risk of fraud by 60 per cent for remote payments made by card and by 80 per cent for e-money payments. We also find that the transactions for which the regulation provides an exemption from SCA requirements are relatively safe.

Suggested Citation

  • Massimiliano Cologgi, 2023. "The security of retail payment instruments: evidence from supervisory data," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 30, Bank of Italy, Directorate General for Markets and Payment System.
    • Handle: RePEc:bdi:wpmisp:mip_030_23
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/mercati-infrastrutture-e-sistemi-di-pagamento/approfondimenti/2023-030/N.30-MISP.pdf
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    References listed on IDEAS

    as
    1. Kosse, Anneke, 2013. "Do newspaper articles on card fraud affect debit card usage?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5382-5391.
    2. Cimiotti, Gerd & Merschen, Toni, 2014. "Trends in consumer payment fraud: A call for consistent strong authentication across all consumer payments," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 8(1), pages 43-63, March.
    3. Scott Schuh & Joanna Stavins, 2016. "How Do Speed And Security Influence Consumers' Payment Behavior?," Contemporary Economic Policy, Western Economic Association International, vol. 34(4), pages 595-613, October.
    4. Gabriel Chodorow-Reich & Gita Gopinath & Prachi Mishra & Abhinav Narayanan, 2020. "Cash and the Economy: Evidence from India’s Demonetization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 57-103.
    5. Cosimo Distante & Laura Fineo & Luca Mainetti & Luigi Manco & Benito Taccardi & Roberto Vergallo, 2022. "HF-SCA: Hands-Free Strong Customer Authentication Based on a Memory-Guided Attention Mechanisms," JRFM, MDPI, vol. 15(8), pages 1-24, August.
    6. Charles M. Kahn & José M. Liñares-Zegarra & Joanna Stavins, 2017. "Are there Social Spillovers in Consumers’ Security Assessments of Payment Instruments?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 52(1), pages 5-34, October.
    7. Fumiko Hayashi, 2019. "Payment Card Fraud Rates in the United States Relative to Other Countries since Migrating to Chip Cards," Economic Review, Federal Reserve Bank of Kansas City, vol. 0(Q IV), pages 23-40.
    8. Tiffany Gates & Katy Jacob, 2009. "Payments fraud: perception versus reality - a conference summary," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 33(Q I), pages 7-13.
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    Keywords

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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