UK card fraud up by half

Plastic card fraud losses in the UK rose 55 per cent last year to UK£292.6 million according to figures released last month by the Association of Payment and Clearing Services (APACS). The principal problem is counterfeiting; losses to bogus card use more than doubled to UK£102.5 million in 2000. The most common technique is skimming in which genuine cardholder details are copied from the magnetic strip and encoded on to a new plastic clone card. Although the banks are working closely with police through a dedicated unit in APACS, the scale of the problem has focussed attention on the need for rapid roll-out of new security measures. APACS sees chip card technology as the way forward. It describes the security of the embedded chips as “virtually impregnable” and claims that they will “eventually make this type of crime almost impossible to commit”. The banks expect to have completed their systems upgrades to accommodate the new cards by the end of 2002 . Together with the retail industries they are currently studying the use of the new cards in PIN identification of customers at point of sale terminals. Retailers have been concerned that the introduction of shielded hand units into which the cardholder types his personal code would delay the transaction process but it is already established practice elsewhere, for example in France. A decision on whether to adopt the PIN system across the UK is expected in the first half of this year. The other major area of fraud growth is card-not-present (CNP) purchases. This includes transactions carried out by phone, mail order or through the Internet. Losses in this category rose 94 per cent to UK£56.8 million. However, despite the fears that the Internet would lead to an explosion in CNP fraud, APACS notes that estimated losses attributable to Internet and telemarketing transactions were “modest” at UK£98.9 million. From April this year the banking sector is implementing an automated address and card verification system that will enable merchants to confirm cardholder billing addresses and cross-check the numbers that are now printed on the magnetic strip. The other main classes of card fraud loss break down to UK£98.9 million (+24 per cent on 1999) for cards stolen or lost, UK£17.3 million (+19 per cent) for cards intercepted in the post and UK£10.2 million lost in fraudulent applications (−11 per cent). When measured as a proportion of total turnover aggregate card fraud last year was worth 0.145 per cent. David Cooper, chairman of the APACS Plastic Fraud Prevention Forum noted that this is less than half the 1991 peak level of 0.33 per cent. However, it also represents a 24 per cent growth on the figure for 1999.