2008 Fraud Figures Highlight Chip and PIN Impact

Fraud loss figures released on 19 March 2009 by APACS, the UK payments association, show that card fraud losses totalled £609.9m in 2008. The two main areas of fraud were on transactions not protected by chip and PIN: specifically Internet, phone and mail order fraud; and fraud abroad – committed by criminals using stolen UK card details in countries yet to upgrade to chip and PIN – which has nearly doubled in two years.

Although card fraud losses have increased, losses as a percentage of plastic card turnover amounted to 0.12% in 2008 – equating to around a tenth of a penny lost to fraud in every £1 spent on cards – less than the 0.14% figure in 2004. This reflects the positive effect of chip and PIN as well as the increase in card use.

Card-not-present fraud losses have increased by 13% over the past year and account for 54% per cent of all card fraud losses. Tackling this fraud is a priority and the industry continues to encourage cardholder and retailer take-up of MasterCard SecureCode and Verified by Visa – secure online payment systems to help prevent online fraud.

Furthermore, the increase in fraud through online and phone transactions should be seen alongside growing use of these shopping channels, as well as increasing numbers of businesses accepting cards remotely. From 2001 to 2008 card-not-present fraud losses rose by 243%; over the same time period, the total value of online shopping transactions alone increased by 524% (up from £6.6bn in 2001 to £41.2bn in 2008).

Counterfeit fraud losses increased by 18% in 2008, but the growth is markedly down on last year’s 46% rise. The vast majority of this fraud is due to criminals stealing card details in the UK to make counterfeit magnetic stripe cards for use in countries yet to upgrade to chip and PIN. The industry continues to apply pressure on those countries such as the US where chip and PIN has still to be rolled out. Increasingly effective use of intelligence systems and the ongoing global rollout of chip and PIN have contributed to this slowdown.

Card ID theft losses have increased by 39% to £47.4m. This is due to a rise in account takeover, whereby criminals take over the running of another person’s credit or debit card. This fraud typically involves a criminal obtaining a genuine card and a genuine PIN, and has contributed to the fraud increases seen at UK shops and cash machines.

Lost and stolen card fraud losses decreased by 4% to £54.1m. Thanks to the introduction of chip and PIN this fraud type is now at its lowest total since the industry collation of fraud losses began in 1991.

Online banking fraud losses totalled £52.5m in 2008 – a 132% increase from 2007 losses. Although phishing incidents continue to increase, online banking customers are increasingly being targeted by malware attacks, which is why the industry continues to remind customers to ensure that they have their computer’s firewall switched on and anti-virus software installed and kept up-to-date.


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