Rise in credit card fraud

Tuesday, 8 March 2005 10:16 AM

There was a sharp rise in debit and credit card fraud last year, but the industry claims this is due to increased activity ahead of the introduction of chip and pin technology.

APACS, who represent the UK card industry, said that fraud losses in 2004 stood at £504.8 million - up 20 per cent on 2003.

However, this was attributed to fraudsters stepping up activity before their methods were thwarted by the introduction of chip and pin.

The new technology sees people pay for goods by typing a pin number into a pad rather than signing their name to authorise a transaction.

This not only makes it harder for a criminal to steal a card - either from the post or a wallet - and use it themselves, but the switch away from magnetic strips and towards microchips makes cloning, copying, or 'skimming' a card far more difficult.

However, as banks and credit card companies shipped 100,000 cards a day to customers to prepare for the changeover, mail fraud leapt 62 per cent.

"As more of us use a pin the harder the criminal's life becomes. But clearly they are going to keep targeting cards," said Sandra Quinn, director of corporate communications at APACS.

"When the banking industry decided to introduce chip and pin in the UK our fraud forecasts showed that without it card fraud losses would top £800 million by 2005. So while we still have a battle on our hands, we are on track to see a significant reduction in this amount."

Along with mail-fraud, the number of businesses offering transactions by phone, fax, and over the internet grew - and so did 'card not present' fraud. This increased by 24 per cent, which was approximately equal to the number of new places that such transactions could be carried out.

Cash machine fraud grew by 81 per cent in 2004, but chip and pin is set to reduce this as the number of shops where 'cards stolen in transit' can be used without a pin will fall and the use of skimmed cards at cash machines will likewise decline, APACS said.

There was also a sharp rise in the high profile issue of identity fraud. ID theft grew 22 per cent, but is still a small proportion of overall card fraud. Fraud on lost and stolen cards, as well as counterfeit cards, made up almost half of all losses.

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