November 12 2006
[Editorial] Internet accounts for 46% of card fraud
Fraudulent use of bank cards in internet, phone and mail order transactions between January and June rose by 5% over the same period of 2005, according to payments association APACS. The actual losses from these cardholder not present transactions stood at £95.3m and are seen as only small increase when compared to the growth in the number of transactions performed online. APACS says that 26.4 million people now shop online with an estimated 372 million transactions undertaken in 2005.
It is a different story however for online banking which saw fraud rise by 55% (to £22.5m) over the same period of 2005. Phising is the main concern here with the number of incidents having grown from 126 in January to June 2004, to 312 in the same period of 2005, to over 5,000 in the first six months of this year.
Whilst the banks themselves need to be ahead of criminals in terms of the level of security, consumers are not always helping themselves. APACS says that over half of online shoppers (51%) never check that a website address changes to https before making a purchase, "indicating that awareness of secure shopping advice is low". The majority of internet card fraud involves a criminal obtaining genuine card details offline and then using them to shop online.
In recent years the banks have been helping to reduce fraud by using neural network-based systems to track patterns in card use and then contact a customer when a change is noted in their usual spending behaviour. Whether a retailer is concerned about fraud depends upon how many fraudulent transactions they take and the value of those transactions. Is it cheaper to accept the fraud as a business cost or to do something about it?
Merchants need to develop their own anti-fraud measures where necessary and these can range from gut feel to more automated systems. Different sectors have their own patterns of fraud and it is usually the 'must have' product of the moment that is likely to be targeted.
There are common fraud indicators across all sectors according to Chris Barling, CEO of shopping cart/point-of-sale system supplier Actinic:
"I knew one merchant who received a fraudulent order for a large quantity of bibles," says Barling, "so take care and don't make any assumptions."
Further changes may be coming to the UK banking system since APACS is liaising with banks, card schemes, retailers and systems vendors on a new authentication system for potential use online. The system requires a cardholder to insert their chip and PIN card into a hand-held card reader and enter their PIN. A unique number would then be given by the unit and it is this which is passed to the retailer. A trial of the system is expected to take place next year.
Emma Herrod
