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Last Updated: Wednesday, 25 August, 2004, 11:17 GMT 12:17 UK
Card fraud prevention 'pays off'
Photo of chip and pin machine
New technology has helped cut card fraud, says Datamonitor
UK credit card fraud dropped for the first time in nine years during 2003, a survey has found.

Market analyst Datamonitor said credit card fraud fell 5% to 402.4m last year, from 424.6m in 2002.

It added that the introduction of chip and pin cards - where customers verify a purchase by keying in a four-digit pin - should cut the figure further.

However, Datamonitor warned it expected identity fraud to increase as criminals find new ways to target victims.

"The efforts spent by the various players in preventing card fraud are finally paying off," report author Karina Purang said.

She added that the introduction of new technology - such as neural network systems which flag up transactions that do not match a cardholder's usual spending behaviour - had helped to curtail card fraud.

Fraud growth slows

However, after analysing figures from the Association for Payment Clearing Services (APACS), Datamonitor found the fall in fraud was "entirely" down to a reduction in the amount of fraud committed abroad on UK cards.

The UK has been successful in tackling fraud, but more can be done
Karina Purang, Datamonitor
Within the UK, fraud is still rising "albeit at a slower rate", Datamonitor added.

Card-not-present (CNP) fraud surged to all time highs of 116.4m last year - up nearly 300% on the levels seen in 1999.

CNP, counterfeit and frauds on lost or stolen cards made up 80% of total fraud losses last year, Datamonitor found.

And despite the introduction of new crime prevention methods, the UK still lags Europe on the fraud front.

Datamonitor said that of all the fraud losses in Europe, the UK accounts for more than 70%.

New technology

However, the roll out of the new chip and pin cards is expected to improve matters.

Credit cards
Criminals may switch from card fraud to identity theft

The cards cut fraud by including a smart chip, which can store more information than the usual magnetic strips, and also by having users verify transactions by keying in a pin number rather than signing a receipt.

France pioneered the technology more than 10 years ago - reportedly cutting fraud by almost 50% following their introduction, Datamonitor said.

The new cards are becoming much more common with almost half of the UK's check-out tills converted to accept payments from the new cards.

Latest figures from the Chip And Pin Programme show more than 50 million new cards have been sent out to around 25 million of the UK's 42 million card holders.

"We have now reached as turning point in the chip and pin rollout," Sandra Quinn a spokeswoman for the Chip and Pin Programme said.

"Every day more shops are switching on and cards are being issued so the number of people who may well be asked for a pin for the very first time is higher than ever."

Identity threat

While anti-fraud measures are improving, the report said UK consumers still faced dangers.

People don't understand how much their personal information is worth
Neil Munroe, Equifax

"The UK has been successful in tackling fraud, but more can be done," Ms Purang said.

Datamonitor warned that with new measures making card fraud tougher, criminals had "another trick up their sleeve" - namely identity fraud.

It said the lack of a national identity card had partly contributed to losses through this method of fraud jumping more than 44% to 29.7m last year.

It advised consumers to take measure to protect their personal documents, for example shredding utility bills or anything that would serve as a proof of address before throwing them away.

"People don't understand how much their personal information is worth," said Neil Munroe from Equifax - which runs a credit protection registration scheme.

He added: "Effectively it's a gold credit card - if it gets into the wrong hands someone can spend a lot of money with it."




SEE ALSO:
Card fraud unit nets 36,000 cards
12 Aug 04  |  Business
Cards 'more popular than cash'
07 Jul 04  |  Business
Fake job ads mask credit card scam
15 Mar 04  |  Technology
Credit card fraud system delayed
29 Nov 03  |  Business
New warning on credit card fraud
11 Nov 03  |  Business
Q&A: Credit card fraud
10 Nov 03  |  Business


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