Chip & PIN cuts UK banking fraud by £60m

But criminals shift attention to internet users

The introduction of chip-and-PIN payment card technology by banks and retailers saved the UK financial services industry £60m last year, according to industry body Apacs.

The use of chipped cards and in-store readers has reduced counterfeiting and stolen card fraud by 24 per cent, according to Apacs' UK Plastic Card Fraud Figures 2005 survey.

Theft of payment cards sent via post fell by 45 per cent, as criminals realised they are less valuable without a PIN.

But more fraudsters are shifting their focus to ecommerce sites and online shoppers.
Fraud against internet, phone and mail order transactions – known as card-not-present (CNP) purchases – increased by 21 per cent from £150.8m in 2004 to £183.2m, making it the biggest target of criminals.

'It is one area that chip-and-PIN doesn't really tackle, so criminals are looking to target it,' said a spokesman for Apacs.

'It highlights that merchants need to be vigilant and cardholders need to do the same in terms of protecting their own personal details.'

But the rate of growth in CNP fraud is slowing due to improved security measures by online retailers. This includes checks on cardholder addresses, verification of the three-digit security code on the back of cards and other initiatives, such as Verified by Visa and MasterCard SecureCode.

Financial loss from online banking fraud doubled from £12.2m in 2004 to £23.2m last year, mainly as a result of phishing scams where customers are tricked into giving out their log-in details.

But plans to physically authenticate online and telephone transactions using a handheld card reader (Computing, 5 January) could cut this further, says Apacs.

'We are putting the brakes on CNP fraud and now we are containing it we want to try and reduce it. That's something we want hope to do with the card authentication devices we are working on,' said the Apacs spokesman.

Cash machine fraud – where criminals install pinhole cameras and cloning technology on ATMs – also fell by 12 per cent to £65.8m last year, with Chip and Pin technology making it harder to use stolen or cloned cards.

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