By Jo Best, 26 August 2004 12:10
NEWS With phishing scams becoming the new viruses, according to some, the UK's losses to credit card fraud took a tumble last year.
According to figures form APACS (Association for Payment Clearing Services), fraud fell by five per cent in 2003 - down from £426.4m in 2002 and £402.4m last year. However, the UK shouldn't go patting itself on the back just yet. A new report from industry analysts Datamonitor puts the drop entirely down to a reduction in fraud on UK cards abroad.
Datamonitor attributes the fall to successful attempts to stop the fraudsters. One such move by the UK banking industry to set up an anti-credit-card fraud unit proved valuable. For a £3m investment in the squad, the industry saved itself £65m in card fraud by stopping some overseas counterfeiting gangs.
Another good move that's reined in the fraudsters, according to Datamonitor analyst Karina Purang is neural networks - banks' computer programs designed to spot unusual spending patterns.
Domestic fraud is still rising, however, with card-not-present, counterfeit and lost or stolen cards making up over 80 per cent of total fraud. Card-not-present fraud - often online transactions where the cardholder can't verify their identity with a signature - is at its highest, with 2003's total rising to £116.4m.
Although banks and financial institutions are hoping soon-to-be-introduced Chip and PIN will cut fraud losses, the new technology won't affect card-not-present fraud.
The hoped-for reduction in fraud may bring with it its own particular set of problems. Datamonitor believes that with one set of their criminal revenue cut off, the bad guys will turn to identity theft to keep the money rolling in.
The amount lost to identity theft rose significantly last year - up by 44 per cent to £29.7m in 2003.
Comments
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1. Roger Huffadine
Card not present?
Once the losses for "card not present" fraud becomes a significant burden on the profits of the card providers they will just pass the debt through to the merchant and overnight the problem will go away.
(Ed note. You'll find banks not merchants are footing the bill from next year in many countries.)
2. anonymous
Yes but the real victims of fraud are the merchants! We operate an online business that in theory should be relatively immune from fraud as it is an events related service. However we had our first instance of fraud quite recently when a person assumed an identity and used what would appear to be fraudulent card details to purchase a place for an event. The cardholder requested a 'chargeback' and the online payment provider WorldPay passed the buck back to us. We undertook considerable time and effort into research to reveal the identies of the various parties (located in Florida and Utah) using reverse lookup telephone, email and address websites and forwarded as much information we could gather to WorldPay. However they were completely disintrested in following up any fraud investigation as they said it's not their policy to do so. So whose responsibility is it to clamp down on fraud? We even contacted the police and they said that they wouldn't event consider small issues like this. So where does an honest merchant go to help crack down on this crime? The message all this sends to the dishonest - go and rip off a merchant using a stolen credit card because chances are no one will bother to follow it up and the poor merchant will end up footing the bill! Who will pay for the costs? - Everyone, eventually!!!
3. anonymous
We also use WorldPay, and have exactly the same problems, albeit on a much larger scale:-
we suffer hundreds of frauds per year, always the perpetrator has the full card details (address, security code, number, expiry, name) - but they almost always shop from an IP address in some 3rd world country rather than the country of the cards address.
Worldpay do nothing. The police don't care. The banks take back their money from us, together with *additional fees*. The theives go unpunished.
Everybody wins - the banks make extra money, the criminals get free stuff - worldpay even charge extra too, as well as taking their commission on the original purchase - but the merchant ends up paying extra to give stuff away for free.
4. anonymous
3DSecure offers "chip and PIN" protection for online cardholder not present transactions. It transfers the risk from merchants to card issuers.