Internet, telephone and mail order card losses, also called ‘card-not-present’ (CNP) fraud, grew 5% in first six months of 2006, according to figures released today by the UK payments trade association, APACS.
Overall, card fraud continued to decline in the six months to June 2006. Total card fraud fell by 5% during this period, from £219.5m to £209.3m, mainly thanks to chip and PIN.
And the CNP fraud increase was at a much slower rate year-on-year compared to a 29% increase between 2004 and 2005.
Losses from CNP fraud have also grown slowly compared to the overall increase in the number of online transactions. In 2005, 24 million individuals made a card purchase over the internet, compared with around 6 million making online card payments in 2000. The majority of internet card fraud, however, involves a criminal obtaining genuine card details in the real world that are then used to shop online, APACS said.
APACS also reports a rise in ‘phishing incidents’, where fake emails leading people to fake websites to input private financial data. This has led to an online banking fraud loss of £22.5m or an increase of 55% year-on-year.
The organisation is also liaising with banks, card schemes, retailers and systems vendors on a two-factor authentication system for potential use in both online and telephone shopping scenarios, and is working towards a trial in 2007. The system would work via a cardholder inserting their chip and PIN card into a hand-held card reader, and entering their PIN. On validating the PIN entered, the reader generates a unique, one-time only passcode, which the cardholder provides to the retailer for authentication with the cardholder’s bank. A further announcement is anticipated in the New Year.
The association also said chip and PIN had made significant inroads in protecting businesses and consumers from fraud in the UK face-to-face retail environment, where losses have decreased by 43%, following on from a 35% fall the year before.
Card fraud abroad has increased by 16% as fraudsters, thwarted by the introduction of chip and PIN in UK shops and cash machines, target countries that have not yet upgraded to the more secure technology. To help tackle this, the European banking industry has set itself the target of completing its chip card rollout by 2010.