The Explosion of Plastic Card Fraud

THE EXPLOSION OF PLASTIC CARD FRAUD

The latest figures published by APACS, The Association for Payment and Clearing Services, has shown that in 2004 plastic card fraud losses soared through the £500 million barrier for the first time. This is an increase of 20% on the figures for 2003 despite the introduction of Chip & Pin. By the same token, losses in 2003 had shown a decrease of 1% on 2002. This begs the question; will Chip & Pin prevent plastic card fraud?

Lets examine some of those statistics, Cardholder-not-Present fraud (CNP), which covers purchases made over the telephone and the Internet, increased by 24% to £150.8 million. This reflects an industry view that the advent of Chip & Pin will in fact drive the fraudster towards mail order fraud where Chip & Pin does not impact. Fraud on cards stolen before the genuine cardholders received them rose by a staggering 62% to £72.9 million; Identity Theft related fraud rose 22% to £36.9 million; counterfeit card fraud rose 17% to £129.7 million whilst theft attributed to lost or stolen cards rose 2% to £114.4 million. In fairness this last sector should start to reflect significant falls following Chip & Pin cards. However, even if that latter aspect fell to zero, that would still leave fraud figures of around £400 million.

Who pays for this? In reality Chip & Pin, it could be argued, gives greater protection to the card issuers. If a cardholder were to claim that monies had fraudulently been removed from his/her account, you would have to convince the issuer that you had not divulged your pin number to someone else, something I suggest one would have difficulty with. Consider how your pin number could be compromised:

· You have your pin number written down on a piece of paper in your wallet or purse.

· A shop assistant watches and remembers your pin number.

· The fraudster watches you input your pin.

· Your card is skimmed, (details copied by a card reader), at a point of sale.

· The fraudster uses a mobile camera phone to photograph your pin as you input it.

· Both your card and pin number are intercepted in the post.

Clearly an awareness of these points can only be of benefit in the long run. How many of us look around before tapping in our pin number? How many of us pick up the reader and hold it? Try inputting your pin number using two digits. Anything that you can do to alter the pattern can only benefit. If you are using a cash machine try, wherever possible, to use a machine situated in a banking hall. There is less chance of the machine having been tampered with than one in the street.

Turning to non-receipt of cards and pin numbers, why are card issuers providing the cards to customers this way? There are numerous hands that the post passes through before receipt by the customer. If they are serious about reducing plastic fraud there are many ways that they could introduce safety measures. Cards could be collected from banks. It is an option that you the customer could opt for. That way you would have to produce identification before collecting the card. Likewise PIN numbers could be issued in the same way. I appreciate that access to banks or even card issuers can be difficult for some people but that is not sufficient reason not to do it for those who would wish to avail themselves of such a service.

But then again, how many of us notify our bankers or card issuers that we have moved in sufficient time for them to re-route any cards they may be issuing? Another haven for the fraudster is the empty property with mail behind the door. Not that many years ago a team of fraudsters obtained credit cards and other vital personal information just by viewing properties that were empty and advertised for sale. Once in the premises they were able to steal items of mail from behind the door. Another flaw is the fact that some card issuers still send out promotional material inviting you to apply for a credit card with personal information pre-loaded onto the application forms

Those of us who have used our cards to purchase goods over the telephone or the Internet will be aware of the latest trend to ask for the last three digits of the security number on the rear of the card. What does that prove? We are told that this is an added security check, if the fraudster has either your card in their possession or has seen your card enough to get this detail then this proves nothing.

We are also seeing a return to old-fashioned cheque fraud. We have dealt with a number of instances recently where stolen cheques have been used to purchase goods. It is foolish to believe that fraudsters will stop their activities just because one avenue is closed to them or made more difficult. There needs to be honesty from the banking and finance sector in tackling financial fraud, be honest with consumers and help and support them with practical guidance and solutions, don’t just look for ways of reducing your own risk.

Peter Ferguson

Managing Director

Corporate Fraud Solutions Limited