Turning Point for Credit Card Fraud?

Losses to credit card fraud in the UK fell for the first time in 9 years, by over 5% in 2003 to £402.4 million, according to figures produced by APACS (Association for Payment Clearing Services). The results are published by Datamonitor, which predicts further falls in 2005 given the anticipated completion of the EMV migration.

Datamonitor's 'Payment Card Fraud in Western Europe 2004' is a detailed analysis of the problem of payment card fraud, focusing on five country markets - France, Germany, Italy, Spain and the UK. The report suggests that the introduction of 'chip and PIN' will directly tackle fraud on lost and stolen cards and counterfeit fraud, although identity theft will be on the increase. APACS says the reduction is entirely due to a fall in the amount of fraud committed abroad on UK cards - domestic fraud is still rising, albeit at a slower rate. Card-not-present (CNP), counterfeit and fraud from lost and stolen accounted for more than 80% of total fraud losses. CNP fraud is at an all-time high, but the increase may be slowing.

Datamonitor Financial Analyst and report author Karina Purang says that efforts by the various players in preventing card fraud have finally paid off, with neural network systems detecting unusual spending patterns and a number of bodies, such as the Dedicated Cheque and Plastic Crime Unit, established to combat card fraud.

The UK is still the biggest contributor to total fraud losses in Europe, accountable for more than 70% of fraud losses, and was the first country to introduce cards compatible with the new EMV standard, which co-ordinates chip payment cards and acceptance terminals internationally and was originally agreed by Europay, MasterCard and Visa. France, the pioneer of the smart card, reportedly saw a reduction of more than 50% in fraud losses following the introduction of PIN-based smart cards more than 10 years ago.

'EMV will definitely bring down the fraud ratio in national markets. The impact will be particularly significant for countries where smart cards were not previously in circulation' according to Purang. EMV migration is proceeding more slowly in Germany, Italy and particularly Spain.

Fraud losses to identity theft rose by over 44% to reach £29.7 million in 2003, and the lack of an identity card system in the UK is partly blamed for this increase. More details of this, and definitions of the various categories of fraud, are available from Datamonitor, whose web site is at www.datamonitor.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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