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Chip-and-Pin impacts on UK credit card fraud5/4/05The Association for Payment Clearing Services, today published figures showing fraudulent use of credit and debit cards in the UK rose by 20 per cent to £504.8m in 2004. This rise is partly due to fraudsters, especially organised gangs, intensifying their efforts prior to the chip-and-pin deadline of January 2005. Chip-and-pin is just one of many fraud prevention methods being introduced by the industry, but it clearly has the fraudsters worried, as shown by their recent burst of activity. However, criminals are becoming more sophisticated as the methods to catch them become sophisticated also. As card fraud becomes more difficult to perpetrate, criminals are targeting other areas of the industry. So it is no surprise to learn that card-not-present fraud increased by 24 per cent becoming the largest fraud type at a cost of £150m, while identity fraud rose by 22 per cent. Online scams such as phishing, accounted for a significant proportion of the £12m losses attributed to online banking fraud, according to APACS. Online fraud appears to be on the increase, with phishing, a scam where customers are duped into disclosing personal security information such as passwords and pin numbers, at the forefront. APACS corporate communications director, Sandra Quinn, said: “When the banking industry decided to introduce chip and pin in the UK, our fraud forecasts showed that without it card fraud losses would top £800m by 2005” However, merchants have voiced concerns that as chip-and-pin takes off, fraudsters will target the Internet and telephone instead. There is also concern that the scheme might shift liability onto the consumer in cases of disputed transactions. These concerns have been voiced by various consumer groups but have been disputed by the industry. In France however, a similar chip- and- pin scheme has resulted in an 80 per cent reduction in card fraud since its introduction eleven years ago. As part of an international initiative to tackle card fraud, the UK chip-and-pin scheme hopefully will be as successful as the French programme. The banking industry hopes that future losses will be contained by initiatives such as chip-and-pin and will go a long way to protecting consumers from the fraudsters. With the recent shift in fraud to online banking and identity theft, it appears that chip-and-pin is having the desired effect on UK credit card fraud. Good news for the industry and consumers, not so for the criminals
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