Chip and PIN, which allows shoppers to verify purchases at point
of sale by keying a four-digit PIN instead of signing on paper, was
launched last year to tackle the growing problem of credit and
debit card fraud.
The scheme became operational on 1st January 2005 and became
compulsory in chip and PIN enabled stores on 14th February this
year. According to APACS, the scheme has already had an impact,
reducing the losses suffered by banks as a result of counterfeit or
lost and stolen plastic cards.
The biggest fall is in respect of cards stolen or lost in the
post (mail non-receipt fraud), which now accounts for only £40
million – a drop of 45% on 2004. APACS explains the fall on the new
cards being more difficult for fraudsters to use, and also because
fewer cards are being sent out than at the peak of the chip and PIN
rollout.
The figures also reveal that fraud resulting from cloned or
skimmed cards is down by 25%; fraud caused by cards being lost by
or stolen from their owner has fallen 22%, while cash machine fraud
has fallen by 12% to £65.8 million.
Following rises in previous years, 2005 also saw a fall in the
level of card ID theft. Fraud caused by either account takeover or
fraudulent applications fell by 17% to £30.5 million (£36.9m in
2004). Card ID theft in the UK remains a very small proportion of
overall fraud at just under 7%, says APACS.
In contrast fraud related to card-not-present (CNP) transactions
– i.e. internet, phone and mail order transactions – grew 21% to
£183.2 million.
But APACS points out that the rate of increase for CNP
transactions has fallen for the first time since 2003, due partly
to the increased use by retailers of checks on cardholder addresses
and the three extra digits on the signature strip, and also to
online authentication initiatives like Verified by Visa and
MasterCard SecureCode.
Online banking fraud losses also grew, reaching £23.2m in 2005 –
almost double the previous year’s losses of £12.2m. These losses
are mainly the result of phishing scams, where customers are duped
into disclosing personal security information.
“Seeing card fraud losses come down is cast-iron proof that chip
and PIN is doing its job,” said Sandra Quinn, director of corporate
communications at APACS. “Back in 2002 we forecast that fraud would
have risen to £800m in 2005 if we didn’t make the move to chip and
PIN so it’s heartening to see total losses well beneath this
figure.”
“Of course, whilst our cards are safer than ever before, the
fraudsters clearly aren’t going to give up so neither will we. Now
chip and PIN is in place the banking industry is discussing how to
leverage chip and PIN to better protect card-not-present
transactions and we hope this will lead to progress later this year
about what this means for cardholders and retailers,” she
added.
