Chip and Pin fails to stop fraud rise

Published on 19/03/2009 21:02

CREDIT and debit card fraud increased by 14 per cent during 2008 as criminals found ways of bypassing the Chip and Pin system, figures showed yesterday.

Losses on plastic cards totalled 609.9 million during the year, up from 535.2 million in 2007, according to payments group Apacs.

It said the main areas of fraud were transactions which did not use a card's Chip and Pin, such as using a card to buy goods over the internet, telephone or by mail, as well as counterfeit cards being used abroad in countries that do not yet have the Chip and Pin system in place.

So-called "card not present" fraud rose by 13 per cent during the year to 328.4 million, to account for more than half of the total.

Counterfeit card fraud increased by 18 per cent to 169.8 million, although the rise was well down on 2007's 46 per cent jump in losses. Apacs said tackling both of these frauds was a priority, and it is continuing to put pressure on countries such as the United States, where Chip and Pin has not yet been rolled out, to introduce it.

The industry is also encouraging cardholders and retailers to use secure online payment systems by MasterCard and Visa.

But Apacs said the rise in card-not-present fraud should be seen in the context of the huge increase in transactions over the internet and by telephone.

Card-not-present fraud losses have risen by 243 per cent between 2001 and 2008, but during the same period the value of online shopping transactions has soared by 524 per cent.

Fraud losses on cards as a result of identity theft increased by 39 per cent during the year to 47.4 million, but there was a 4 per cent drop in fraud on lost and stolen cards to 54.1 million – the lowest level since the industry began to collate the figures in 1991.

Apacs said that, although card fraud losses had increased during the past year, losses as a percentage of card turnover were falling, dropping to 0.12 per cent of turnover in 2008 from 0.14 per cent in 2004.

The group also reported a 132 per cent rise in online banking fraud, with this costing the industry 52.5 million.

It said although phishing attacks, under which fraudsters try to trick consumers into revealing their account details, continued to increase, customers were also being targeted by Malware attacks, under which computer viruses are installed that can record people's passwords and financial details.

Cheque fraud losses also increased during the year, rising by 25 per cent to 41.9 million, although the majority of losses in this area were prevented, with the industry detecting 573 million of attempted cheque fraud.

The figures come as a national crackdown on fraud was announced, with the National Fraud Strategic Authority launching the UK's first National Fraud Strategy.