Fraud losses on UK credit and debit cards have
hit a ten-year low, according to data published by Financial Fraud
Action UK. But this welcome trend is frustrated by the fact that
cheque fraud has soared. Duygu Tavan reports
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The latest data from Financial Fraud Action UK
shows that annual fraud losses on UK-issued cards have been in
steady decline since 2007, falling by 7% between 2010 and 2011 to
£341m.
The decrease in card fraud was countered by a
sharp rise in telephone banking fraud, which has climbed by 32%
from the end of December 2010 to £16.7m, and losses from cheque
fraud were up 17% on last year, at £34.3m.
Card-not-present fraud (CNP) fraud, that
committed on the phone, by internet or via mail order, amounted to
£220.9m in 2011, a 3% drop on the previous year.
CNP fraud was the biggest type of fraud on all
UK-issued cards and made up 64.8% of all card fraud for 2011
(compared to 62.1% in 2010). The second biggest type of UK-issued
card fraud was, perhaps unsurprisingly, on lost or stolen cards,
which totalled £50.1m. That figure was 13% higher than at the end
of 2010.
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By GlobalDataThe biggest improvement in UK-issued card
losses was in skimmed and/or cloned cards, which declined by a
quarter from 2010 to 2011 to £36.1m. Card ID theft was 41% lower at
the end of 2011 than a year ago at £22.5m.
The FFA calls the decline in card fraud a
“healthy trend” and puts it down to “the industry’s efforts to
deter, detect and prosecute fraudsters” through initiatives such as
MasterCard SecureCode, Verified by Visa and American Express
SafeKey; as well as consumer and merchant awareness campaigns,
better data sharing and upgraded chip-and-PIN security.
Fraud losses in online banking improved in
2011, down 24% on 2010 to £35.4m. The FFA said that “this decrease
has occurred despite a continuing rise in phishing attacks and
attacks involving malware” – according to the FFA, phishing attacks
increased by up 80% on the previous year.
“Online banking fraud is going down as efforts
to educate customers on the threat of phishing and malware are
paying off. Customers have become more security aware and better at
protecting their PCs,” says an FFA spokesperson. “Banks have also
been increasingly successful at detecting and preventing suspicious
transactions. Another factor for some banks has been the use of
two-factor authentication devices as well as providing customers
with additional security software.”
Cheques causing problems
The decline in card fraud statistics may
appear encouraging, but it really is not all good news, says Nick
Mothershaw, director of identity & fraud services at Experian
UK & Ireland.
“Experian data shows that whilst some areas of
financial services have seen a decrease in fraud, the threat has
shifted to other areas where fraudsters perceive points of
weakness,” according to Mothershaw.
The latest data from Experian shows that
credit card fraud increased for three consecutive quarters by the
end of September. Between the second and third quarter alone,
credit card fraud rose by 10%; and by 7% from the year-previous
quarter. Experian found that the current credit card fraud rate is
the highest since April 2010, and 12 out of 10,000 credit card
applications were fraudulent.
Cheque fraud showed a sharp (17%) year-on-year
rise in 2011, the first rise in cheque fraud reported by the FFA
since 2008.
Does this expose newly-found loopholes in
cheque processing? Brian Kinch, senior partner in FICO’s global
fraud practice says it is simply a case of fraudsters identifying
the weakest channel. “I think there has been more sophistication in
the management of fraud in other channels. Therefore, the likes of
cheques have become an easier target,” he says.
“The defences for cheque fraud are not as
strong as those in other channels – it is not a lack of
investment,” Kinch explains.
He says there are three key elements,
routinely monitored in the fight against online banking fraud that
should also be applied to cheque fraud – the volume of activity
(how many cheques go through), the value of the cheque and the
velocity at which a cheque payment is undertaken.
But is there a need for banks to invest in
improved cheque processing security technology? The FFA says
no:
“The fraud detection systems the industry has
in place continue to identify and prevent over 90% of attempted
cheque fraud before it occurs,” says the spokesperson.
And James Taylor, identity and fraud
consultant at Experian agrees. “The banks we talk to take ID
verification and fraud measures very seriously,” he says. “It is
unfair to say that the focus on one area has led to a lack of focus
elsewhere. What Experian sees is that the criminal fraudster is
very adaptable and they will seek to perpetrate fraud where they
perceive the weakest channel.”
“When chip-and-PIN came in, fraudsters
migrated to identity fraud for instance. The measurers lenders have
put in place in the past few years have increased in
sophistication. I think the increase in fraud levels is more a sign
of the times – fraudsters are more sophisticated, they operate
across multiple, international boundaries.”
