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.
