Last hurrah for credit card fraud

Debit and credit card fraud increased last year, as criminals stepped up their efforts before chip and pin measures came into place, new figures have shown.

APACS, who represent the UK card industry, said that fraud losses in 2004 stood at £504.8 million - up 20 per cent on 2003.

However, this was attributed to fraudsters stepping up activity before their methods were thwarted by the introduction of chip and pin.

The new technology sees people pay for goods by typing a pin number into a consol rather than signing their name to authorise a transaction.

This not only makes it harder for a criminal to steal a card - either from the post or a wallet - and use it themselves, but the switch away from magnetic strips and towards microchips makes cloning, copying, or 'skimming' a card more difficult.

However, as banks and credit card companies shipped 100,000 cards a day to customers to prepare for the changeover, mail fraud leapt 62 per cent.

"As more of us use a pin the harder the criminal's life becomes. But clearly they are going to keep targeting cards," said Sandra Quinn, director of corporate communications at APACS.

"When the banking industry decided to introduce chip and pin in the UK our fraud forecasts showed that without it card fraud losses would top £800 million by 2005. So while we still have a battle on our hands, we are on track to see a significant reduction in this amount," she added.

Along with mail-fraud, the number of businesses offering transactions by phone, fax, and over the internet grew - and so did 'card not present' fraud. This increased 24 per cent, which was approximately equal to the number of new places that such transactions could be carried out.

Cash machine fraud grew by 81 per cent in 2004, but chip and pin is set to reduce this as the number of shops where cards stolen in transit can be used without a pin will fall and the use of skimmed cards at cash machines will likewise decline, APACS said.

ID theft grew 22 per cent, but is still a small proportion of overall card fraud. Fraud on lost and stolen cards, as well as counterfeit cards, made up almost half of all losses. However, chip and pin is set to have a major impact in these two areas, APACS predicted.

"Many people have predicted where the fraudsters will attack next but we have long foreseen that we need to keep cards secure in all environments. That's why there is a whole raft of fraud prevention initiatives in place and in the pipeline to prevent, deter and detect all kinds of card fraud - both at individual bank level and industry-wide," said Ms Quinn.

People worried about card fraud, or wanting lo learn how to safeguard their plastic, can visit APACS website www.cardwatch.org.uk.