Fraud losses on UK debit and credit cards reach a new ten-year low while online fraud also drops

Fraud losses on UK debit and credit cards reach a new ten-year low while online fraud also drops

The latest payment fraud figures for 2011, released today by the banking and card payments industry show that credit card, debit card and online banking fraud levels have continued to fall.

But the Financial Fraud Action UK figures, compiled with The UK Cards Association and Cheque & Credit Clearing Company, reported minor increases in telephone banking and cheque fraud losses.

Fraud losses on UK cards fell 7% from £365.4 million (m) in 2010 to £341m in 2011, resulting in a three-year reduction of nearly 45%, which puts card losses at their lowest levels since 2000. Online banking fraud losses fell 24% from £46.6m in 2010, to £35.4m in 2011.

Reduction and growth trends

Both cards and online fraud were already falling according to half-year figures released last October.

The financial services industry body said this continued reduction in fraud was due to the buy-in of retailers and consumers to online protection initiatives such as MasterCard SecureCode, Verified by Visa and American Express SafeKey.

It also said improved sharing of fraud data and intelligence within the industry and with law enforcement and other sectors, the increased use of fraud detection tools and safeguarding of chip and PIN equipment had also helped, along with increased chip and PIN roll outs abroad.

Continuing the trends, telephone banking fraud losses rose from £12.7m in 2010 to £16.7m in 2011 (an increase of 32%). Most losses reportedly involved criminals, who use fake emails or cold calling, to dupe customers into disclosing their personal security details such as telephone banking passcodes.

Cheque fraud losses rose from £29.3m in 2010 to £34.3m during 2011 (an increase of 17%). This rise was mainly from an increase in fraudsters stealing genuine cheques and altering the payee name or using details from genuine cheques to create counterfeits. The industry body added that over 90% of attempted cheque fraud gets stopped before the cheque is paid.

Sophisticated targeting of simple crime

Detective Chief Inspector Paul Barnard, who heads up the industry-sponsored police squad, the Dedicated Cheque and Plastic Crime Unit, stated: “As technological advances have made our payments more secure, we’ve seen a spike in more simplistic crimes.”

Pat Carroll, chief executive of communications authentication and transaction verification technology provider ValidSoft, commented that, in recent months banks have been taking a far more aggressive approach to transaction declines. And in the case of cross-border transactions, Carroll said on average nine out of ten declined transactions are in fact legitimate.

“This is the credit card equivalent of bricking up your doors and windows to prevent burglary – very effective, but hardly a long-term solution. Rather than simply basing their decisions as to whether to accept or decline a transaction using historic data and behavioural patterns of customers, complementary technology exists to anonymously make accurate assessments of the real time situation of customers, so that not only is fraud reduced, but customer satisfaction is maintained at the same time.”