Plastic card fraud on the increase

12 March 2008

Industry figures show a 25% increase in card fraud

According to the banking industry, fraudulent activity on UK credit cards and debit cards rose by 25% in 2007, with losses of £535m.

The Association of Payment Clearing Services (APACS) said that the rise in fraudulent activity was driven by the 77% increase in card fraud abroad, typically in countries yet to implement a chip and PIN system.

Card fraud abroad now makes up 39% of all card fraud losses at a value of £208m.

The two main fraud types that were prevalent last year were ‘card-not present fraud’, accounting for over half of all fraud losses at £291m, and counterfeit card fraud, with losses adding up to £144m.

When buying items over the phone, the internet or by post, a ‘card-not-present transaction’ takes place because the retailer does not physically see your plastic card.

Counterfeit card fraud occurs when criminals use stolen UK card details or clone your card using a special magnetic strip reader, which is placed in areas where your card is routinely ‘read’ e.g. card insert slots in cash machines. The stolen details can then be copied onto another card carrying a magnetic strip and used in cash machines to withdraw your cash.

When all the fraud acts are taken together, the overall amount of UK card fraud saw an increase of 6% last year.

However, this figure is considerably lower than that of a few years ago before chip and PIN technology was introduced in the UK.

Sandra Quinn, of APACS, said: “Although card fraud levels have now begun to go up again due to fraud abroad and card-not-present fraud losses, chip and PIN has proven to be an undoubted success in reducing card fraud on the UK high street.

“And, as more countries follow our lead and upgrade to chip and PIN, the opportunities for criminals to use our stolen magnetic stripe details overseas will decrease,” she added.

Chip and PIN systems should be in place throughout Europe by 2010.