Rise in online cons 'will force banks to end cover for fraud'

A MASSIVE increase in internet fraud is likely to force leading companies to stop underwriting millions of pounds in losses suffered by consumers, one of the country's top computer security experts has predicted.

Bill Buchanan, a professor at Napier University's school of computing, believes the scale of online fraud will become so big that credit card companies will no longer be able to afford to cover the cost to consumers.

The scale of internet fraud has risen in recent years as more people shop online. According to the industry body APACS, "card-not-present" internet fraud jumped from 45 million in 2003 to 154.5 million last year. Overall, credit card fraud costs around 428 million a year, although that figure has fallen with the introduction of chip-and-PIN devices in shops.

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Prof Buchanan said security measures were sorely lacking for internet shoppers and last night warned of an impending e-commerce crisis at a professorial lecture in Edinburgh.

He told The Scotsman that online consumers would be forced to take out insurance policies to protect them from fraudsters. He added: "If losses keep growing, [credit card providers] may stop providing protection. They won't be able to afford to underwrite the spiralling cost of fraud."

Prof Buchanan, who has written more than 20 books on computer security, said the internet "is not nearly as secure as it could be". He believes the scale of even a single credit card scam could run to billions of pounds and force the banks' hands.

Early Warning, an organisation that helps retailers, police and banks monitor online credit card fraud, has warned that such fraud will rise "by an exponential rate" in the years ahead.

Meanwhile, a YouGov survey for Get Safe Online - a campaign group set up by the government, police and private companies - last month found one in ten internet users in Scotland fell victim to online fraud last year, losing an average of 1,001 each.

The dangers of credit card fraud were recently highlighted by news that hackers put hidden software on TK Maxx computer systems that went unnoticed for 16 months - meaning at least 45.7 million people in the UK and US may have had their debit or credit card numbers stolen.

A number of banks have begun to take steps to protect customers. Barclays, for example, will this year introduce a system which will require people to prove they have their debit card by using a personal swipe unit for online banking.

The British Bankers Association said banks' commitment to underwrite card fraud losses was enshrined in the Banking Code and there were no plans for legislation to change this.

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Sandra Quinn, the director of communications at APACS, said she disagreed with Prof Buchanan's prediction, adding: "We are one of the few countries to offer payment following card fraud and there is no need to change this."


45 million

The number of cases of card-not-present fraud - the use of cards to pay for goods on the telephone or internet - reported in 2003.

154 million

The number of cases of card-not-present fraud reported last year.


The average number of cards owned by Britons - more cards per head of population than in Europe, Australia or Asia.

6.4 billion

The number of card transactions in the UK in 2006 - approximately 300 per second.

1 million

The amount of money lost to card fraud every day in the UK.


The gap in seconds between credit fraud incidents in the UK.


The number of cases of card fraud reported in 2006.

45 million

Number of card details stolen from TK Maxx customers in Britain and US in the world's biggest credit card fraud.