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The introduction of chip and PIN has made it more difficult for fraudsters to commit credit card fraud, with losses at UK retailers falling by £146.7 million over the past two years. However, criminals are still targeting our credit cards and debit cards with the aim of copying the magnetic stripe data. They use this data to create counterfeit magnetic stripe cards that can potentially be used in countries that haven't upgraded to chip and PIN. This has caused the increase in fraud abroad losses over the last 12 months.
Total fraud losses as a percentage of plastic card turnover equated to 0.095% in 2006 - significantly less than the 0.141% figure in 2004. Although total credit card fraud losses fell by 3% in the past year to £428 million, APACS, the UK payments association, reports that cases of counterfeit fraud, where cards are cloned, have risen by 3% to £99.6 million, while card not present fraud - where cards are used over the phone, Internet or mail order - has increased 16% to £212.6 million.
A number of measures are currently in place to tackle card-not-present and online fraud, such as an automated cardholder address verification and card security code system, and MasterCard SecureCode and Verified by Visa.
APACS is urging online shoppers to register with Verified by Visa and MasterCard SecureCode whenever they are given the option of doing so. Cardholders simply need to register a private password with their card company for use when shopping online at participating retailers.
The banking industry is now working on the next generation of fraud prevention solutions to help tackle fraud in non face-to-face transactions (i.e. e-banking and internet and telephone shopping). APACS is liaising with banks, card schemes, retailers, trade associations and systems vendors on the implementation of a trial of one such solution that builds upon chip and PIN technology and will enhance the online protection already offered by systems such as MasterCard SecureCode and Verified by Visa.
Lloyds TSB is the first UK bank to introduce automated telephone alerts to warn customers of suspicious transactions on their current accounts. Lloyds TSB's new technology, called 'First Alert', is designed to work alongside the bank's fraud detection systems, automatically calling customers, whenever and wherever card fraud is suspected on their account.
Customers will receive an automated phone call, whenever the bank notices a potential fraud on their account. The message customers hear will ask them if they recognise the transaction in question. If the customer thinks fraud has taken place they will be transferred directly to a Lloyds TSB call handler who will then help freeze the account and organise a refund. Where customers recognise the transaction, they will be able to confirm it is genuine and end the call.
The new system will dramatically increase the speed at which fraudulent transactions are spotted and dealt with by the bank. It will allow more customers to be contacted directly where fraud is suspected and will mean this can be done faster than ever before. It will also allow customers to notify the bank straight away if they know the transaction is genuine.
First Alert will help clamp down further card fraud, particularly 'card not present' fraud, where card details are used fraudulently over the phone, online or for mail order purchases; and counterfeit fraud, where card magnetic stripe details are copied onto a cloned card before being used.
Credit and debit card fraud dwarfs cheque fraud at £30.6 million and online banking fraud at £33.5 million, although the latter did jump by 44% in 2006.
14 March 2007 © Moneyextra.com
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