After suffering a spike in fraud from skimmers on gas pumps earlier this year, fleet-fueling payment specialist WEX Inc. reported Wednesday that fraud losses are falling thanks to its new risk-control systems.
“The steps we have taken to reduce losses fraud have started to pay off,” Roberto Simon, chief financial officer at South Portland, Maine-based WEX, told analysts during a Wednesday morning conference call to review the company’s third-quarter financial results. “As we anticipated, fraud from card skimming trended down as the quarter progressed.”
WEX provides fleet-fueling cards to businesses that are accepted at the vast majority of the nation’s gas stations. In July, the company reported a spike in fraud from skimmers placed on fuel pumps that capture magnetic-stripe payment card data. Fraudsters are targeting unattended fuel pumps because very few pumps yet can read EMV chip cards, which are much less vulnerable to skimmer fraud than mag-stripe cards.
Credit losses totaled $19.6 million in the third quarter, with slightly less than half of that coming from fraud, Simon reported. Fraud expenses in September and October were down 60% from their second-quarter peak, he added.
Simon and chief executive Melissa Smith didn’t go into detail about exactly how WEX’s enhanced anti-fraud software works, but it makes rules-based decisions about the riskiness of each fuel purchase. Smith said the system is still in what she termed a “burn-in” testing period that involves adjusting risk parameters.
“We are in the process of making adjustments to the real-time logic of the tools,” she said. “We’ll learn a lot more through that process in the next couple of months. What we’ve seen so far is this reduction by month in losses.”
Despite the improvements, Simon expects that fleet credit losses will amount to 19 to 24 basis points (0.19% to 0.24%) of spend volume in the fourth quarter, down from 23.5 basis points in the third quarter but still above last year’s average of 18.3 basis points.
Due to the expense and complexity of retrofitting gas pumps for chip card acceptance, Visa Inc. and Mastercard Inc. have delayed their originally planned October 2017 EMV liability shifts for unattended fuel pumps until October 2020 . Until large numbers of pumps get EMV chip card readers, WEX, other card issuers, and gas stations will remain vulnerable to skimming fraud.