UK Card Fraud Losses Decline 23% in First Half of 2009

Katy Worobec, Head of Fraud Control, says: “These latest fraud figures are good news but we know there’s no room for complacency. Whilst industry online security initiatives such as Verified by Visa and MasterCard SecureCode may be making their presence felt, the fraudsters are never going to shut up shop and, of course, there are emerging areas such as online banking fraud which has risen again.

“Although it’s difficult to prove, we think that one of the reasons for this dip in card losses may simply be as a result of fraudsters realising that they can prosper more by targeting foreign-issued cards – particularly those without chip and PIN protection and which currently have stronger currencies than sterling. The fact that we’ve seen a 36 per cent increase in the first half of this year in the amount of fraud being committed on foreign issued cards here in the UK adds some weight to this theory.”

The Dedicated Cheque and Plastic Crime Unit (DCPCU) - the special police unit sponsored by the banking industry to stamp out organised card and cheque fraud across the UK – has certainly played its part in the encouraging fall in card fraud. In the first half of the year, conservative estimated savings to the industry as a result of their fraud prevention work amounted to £12.8 million. This is on top of the £315 million in fraud savings to the industry as a result of the Unit’s work since its launch back in 2002.

Various other factors have contributed to the fall in the card fraud figures. Chip and PIN has undoubtedly continued to make it more difficult for fraudsters to commit fraud on our cards in the UK and, as a result: losses at UK retailers are down by 26 per cent from the same period last year; mail non-receipt fraud fell by 33 per cent; and lost and stolen card fraud is down by 6 per cent to its lowest level since the industry collation of fraud losses began in 1991. Additionally, the banking industry continues to work closely with the retail community to raise awareness of the ways in which retailers can protect their chip and PIN terminals from criminal attack.

Losses from phone, internet and mail order shopping fraud have fallen for the first time ever and now stand at £134 million. Reasons behind this decrease include the increasing use of sophisticated fraud screening detection tools by retailers and banks, as well as the continuing growth in the use of MasterCard SecureCode and Verified by Visa (online payment systems that make cards more secure when shopping on the internet), by both online retailers and cardholders.

There has also been a significant decrease in fraud abroad. One of the factors causing this is the fraud detection systems used by the banks and card companies, which monitor for unusual spending - meaning that potential fraud is stopped before it happens.

Online banking fraud losses totalled £39.0 million during the six months to June 2009 – a 55 per cent rise on the 2008 figure. The increase is largely due to criminals employing more sophisticated methods to target online banking customers through malware scams – which target vulnerabilities in customers’ PCs - rather than the banks’ own systems which have proved more difficult for the fraudsters to attack. There were also more than 26,000 phishing incidents during January to June 2009 – a 26 per cent increase on the amount seen in the same period last year.

The industry continues to raise awareness about the importance of having up-to-date anti-virus and anti-spyware software and is working closely with the Metropolitan Police Service Police Central e-Crime Unit (PCeU), which has been set up to co-ordinate the law enforcement approach to all types of e-crime, and provide a national investigative capability for the most serious e-crime incidents. Help and advice about preventing all types of online banking fraud is available at www.banksafeonline.org.uk.

Cheque fraud losses during January to June 2009 decreased from £21.2 million to £15.6 million. The overwhelming majority of fraudulent cheque payments get stopped before the cheque is paid, and the industry’s ongoing work to prevent cheque fraud coupled with the continuing decline in cheque usage is likely to have played a major part in the 26 per cent fall.