Fraud intelligence sharing with the EBA fraud taxonomy: creating a pan-European ecosystem

Annick Moes from the Euro Banking Association (EBA) explains how PSPs can enhance the comparability, granularity, and actionability of their data by using the EBA Fraud Taxonomy.

Fraudsters operate in real time and cooperate across accounts, institutions, and national borders. Payment service providers (PSPs) need to level the playing field by joining forces in the fight against payment fraud. To this effect, efforts are ongoing at the regulatory and industry level to create a fraud data and intelligence-sharing ecosystem in Europe. However, for such collaboration to see success – and for the full benefits of shared data to be unlocked – it is extremely important that everyone speaks the same language.

That is why, the Euro Banking Association (EBA) developed the EBA Fraud Taxonomy, which equips fraud fighters with a harmonised pan-European vocabulary and categorisation approach for naming and organising fraud types for payments.

The EBA Fraud Taxonomy is available to any interested party. Request your free copy via the EBA website.

By leveraging the EBA Fraud Taxonomy, PSPs can ensure their data is not just comparable across institutions, but also granular and actionable. The move to this fraud taxonomy will serve as a foundational step in the introduction of effective pan-European fraud data-sharing solutions.

The EBA Fraud Taxonomy provides a simplified and straightforward framework to capture and categorise fraud scenarios related to account-to-account (A2A) and card payments. It offers a standardised method to identify how the fraudster first contacted the victim, what trick the fraudster used to get hold of the victim’s money or credentials, and who initiated the payment transaction affected by the fraud. At the same time, so-called labels or tags allow fraud experts to add further details on a fraudulent event, as they deem fit, which ensures ease of use and maximum flexibility.

With its uniform pan-European vocabulary and fraud categorisation approach, the EBA Fraud Taxonomy puts fraud experts on the same page – an essential step towards making data comparable between PSPs in Europe and thus making data exchange more effective. This, in turn, will help drive the development of new collective and individual fraud-fighting strategies.

Thanks to its collective and practitioner-driven development, the EBA Fraud Taxonomy offers many advantages, including:

• Leveraging established terminology. The taxonomy builds on the work done by fraud experts around the globe by relying on definitions from authoritative and publicly available sources, wherever possible.

• Applicable to A2A and card payments. The taxonomy applies to both A2A and card payment fraud, breaking down the siloes that currently exist in classifying and considering these fraud types.

• Aligned with PSD2 Fraud Reporting Guidelines. The definitions for the initiator of the fraudulent payment transaction within the taxonomy are aligned with the European Banking Authority Guidelines on Fraud Reporting under PSD2.

• Separates fraudsters’ contact methods (‘how’) from applied tricks (‘what’): A unique feature of the taxonomy – or a ‘revolutionary approach’, as one pilot adopter observed – is that it distinguishes between the point of contact between fraudster and victim, and the action taken by the fraudster. By comparison, the majority of fraud taxonomies only capture the point of contact indirectly (e.g. if they classify a trick as 'online shopping fraud') or the categories are too high-level (e.g. social engineering). By collecting separate data points on the ‘Method’ (point of contact) and the ‘Modus’ (action taken by the fraudster), PSPs have better and more granular data at their disposal to prevent future fraud attacks, e.g. via more targeted customer education campaigns.

Figure 1: Traditional approach vs. EBA Fraud Taxonomy approach

Source: Euro Banking Association

• Developed by fraud experts. The taxonomy has been created and evolved by more than 30 fraud experts from 15 European countries.

• Annual review process. Updates to the taxonomy are based on an annual change process to ensure it is future-proofed against evolving fraud trends and upcoming regulations. Any interested party can submit change requests proposing amendments to the taxonomy.

• Transition friendly. The ability to use labels supports PSPs in their transition to the EBA Fraud Taxonomy since they can tag labels on their cases that reflect the terminology they currently use. This also helps PSPs compare their legacy reports to reports based on the EBA Fraud Taxonomy.

The EBA Fraud Taxonomy supports PSPs in their fight against fraud at many different levels. In short, it enables:

• easier and faster data point collection;

• accelerated transaction tracking and advanced model training;

• better fraud analytics, prevention, and detection;

• identifying, sharing, and comparing fraud trends and data;

• improved internal and external fraud reporting;

• optimised fraud response (customer support, investigation, case handling);

• effective customer and employee education.

Implementation of the EBA Fraud Taxonomy will be a crucial step in the introduction of fraud intelligence and data-sharing solutions, for which European regulators are currently preparing the ground. Against this backdrop, the EBA Fraud Taxonomy will go from being a ‘nice to have’, to a ‘must have’.

This editorial was first published in The Paypers' Next-Gen Technologies to Detect Fraud and Financial Crime Report 2024. The report explores how banks, fintechs, and PSPs are using AI and emerging technologies to detect and combat sophisticated fraud.

About Annick Moes

Annick Moes is Head of Industry Issues, Cooperation Initiatives, and Communications at the Euro Banking Association (EBA), the largest cross-sectoral network of practitioners pursuing a pan-European vision for payments. Annick is responsible for the EBA’s market practices and regulatory guidance stream, which provides the European payments ecosystem with a pan-European perspective and practical support. She has been working in European payments for over 20 years.

About Euro Banking Association (EBA)

The mission of the Euro Banking Association (EBA) is to foster dialogue and experience exchange amongst payments industry practitioners towards a pan-European vision for payments. The EBA pursues its mission through involving members and relevant stakeholders in thought leadership on innovation, helping members to understand and implement regulation and by supporting the development of market practices. The EBA has more than 160 members from the EU and across the world.