Warning for people with physical bank cards in South Africa

South African banks are encouraging the adoption of digital wallets and virtual cards as physical bank cards are vulnerable to various types of fraud and pose a potential risk for their banking clients.

According to the Banking Association of South Africa (Basa), criminals use various fraud methods surrounding physical bank cards and consistently adjust their approach to continue tricking individuals.

It says the most common forms of these crimes include counterfeit cards, lost and stolen cards, false applications, and card-not-present fraud.

“Card fraud is difficult for the banking industry because perpetrators prey on the vulnerabilities of bank customers and do not target banking systems,” said Basa.

Counterfeit card fraud involves illegally manufacturing cards using personal information stolen from the magnetic strip of a legitimately issued card.

“In other cases, lost and stolen cards, or old cards, are encoded with new information that was stolen from a genuine card for purposes of committing fraud,” said Basa.

Fraudsters typically use card-skimming equipment to steal the information required to commit counterfeit card fraud.

Basa also warned that physical cards are easily lost or stolen, and in many cases, fraudsters can use the card to process fraudulent transactions.

Therefore, banking customers with physical tap-to-pay cards must set a limit for transactions above which a card PIN is required.

False application fraud refers to criminals processing fraudulent transactions on an account where the card was acquired through a falsified application.

However, Basa noted that the introduction of legislation like the Financial Intelligence Centre Act (Fica) and the National Credit Act (NCA) has significantly reduced fraudulent application fraud.

“False application fraud has declined by over 90% from the 2007/2008 peak,” it added.

Another risk emerges when customers apply for validly issued credit and debit cards, only for them to be intercepted by fraudsters before they reach the designated recipient.

These cards can then be used to process fraudulent transactions on the authentic holder’s account.

Surge in virtual card transactions

Several prominent South African banks have observed a surge in virtual card transactions as banking clients realise the technology’s benefits and heightened safety.

In a recent statement, FNB revealed that its customers had exceeded R100 billion in virtual card transactions since the bank launched the technology in October 2020.

“Notably, R50 billion of this is attributed to transactions made between January and December 2024 alone,” it said.

“Moreover, the bank notes its highest year-on-year growth in in-store virtual card spend at 108.2% as of end-December 2024.”

FNB said virtual card adoption is increasing significantly.

It currently has 5.3 million active virtual cards, and added that the overall number of customers using virtual cards has increased by 40.4% year-on-year.

FNB credit card and card platform CEO, Senzo Nsibande, said FNB’s virtual cards offer convenient, safe, and secure transactions.

“When we launched the FNB Virtual card and expanded our digital payments ecosystem, we understood that it forms an important part of our journey in making the customer’s payment experience as convenient, safe, and secure as possible,” he said.

FNB’s virtual cards feature a dynamic card verification value (CVV) security code that changes hourly, and enableusers to temporarily block, cancel, or replace their virtual cards through their banking apps if they suspect fraudulent activity.

“In an environment with constantly evolving threats, it’s imperative that we protect our customers and ensure safeguards that allow them to always transact securely,” said Nsimande.

“Our virtual card is central to this promise.”

FNB’s data shows that most customers use their virtual cards to buy groceries, eat out, purchase fuel, pay for travel and holidays, and for general retail.