Rise in Credit Card Fraud Losses is Fuelled by Increased Fraud on Card Use Overseas.

September 04 2007

By Stephen Kiely, ccrmagazine.co.uk

The increase in total credit card fraud losses for the first half of 2007 have been driven by a 126% rise in fraud on UK-issued cards being used overseas, according to trade body. The UK payments association, APACS, have released figures showing that total card fraud losses increased by 26% in the six months to June 2007 compared with the first half of 2006, this figure largely resulting from the high fraud figure for overseas use. In contrast, domestic card fraud continued to fall thanks to chip and PIN, with losses at UK retailers down 11% and losses at UK cash machines down 57%.

APACS said that the introduction of chip and PIN has made it more difficult for fraudsters to commit card fraud in the UK. Criminals are now being forced to commit card fraud overseas on UK-issued cards. They copy the magnetic stripe data on our cards to create fake cards that they use in countries that have yet to upgrade to chip and PIN. However, as more countries rollout this secure technology the opportunities for criminals to use fake magnetic stripe cards overseas will decrease. To help achieve this end, the European banking industry has set itself the target of completing its chip card rollout by 2010.

Losses from online, phone and mail order shopping fraud have continued to increase year-on-year. However, this increase has to be seen in the context of increasing numbers of people shopping online and ever-growing numbers of online transactions. According to APACS figures, the number of adults shopping online has increased by 157% in the last five years, from 11m in 2001 to over 28m last year. By comparison, online, phone and mail order fraud has grown by 122% during the same time period. The fraud to turnover ratio on online card transactions has also decreased - down from 0.7% in 2004 to 0.5% in 2006.

Online banking fraud losses fell by 67% from 22.4m in the first six months of 2006 to just 7.5m in the same period this year. This decrease occurred because online banks have successfully implemented a range of measures to detect and prevent fraud, coupled with the fact that there was an unusually high level of online banking fraud in the first few months of 2006.

Sandra Quinn, director of communications at APACS, said: "These figures show how the fraudsters have changed tack. A couple of years ago they were mainly stealing cards and card details for use in UK shops and cash machines, but today, because of chip and PIN, they have been driven overseas - using fake magnetic stripe cards specifically in countries which have yet to upgrade to chip and PIN."