The two main areas of fraud were on transactions not protected by chip and PIN: specifically internet, phone and mail order fraud; and fraud abroad - committed by criminals using stolen UK card details in countries yet to upgrade to chip and PIN - which has nearly doubled in two years.
Although card fraud losses have increased, losses as a percentage of plastic card turnover amounted to 0.12% in 2008 - equating to around a tenth of a penny lost to fraud in every £1 spent on cards - less than the 0.14% figure in 2004. This reflects the positive effect of chip and PIN as well as the fact that we continue to use our cards more and more each year.
Card-not-present fraud losses have increased by 13 per cent over the last year and account for 54 per cent of all card fraud losses. Tackling this fraud is a priority and the industry continues to encourage cardholder and retailer take-up of MasterCard SecureCode and Verified by Visa - secure online payment systems that help prevent online shopping fraud¹. Furthermore, the increase in fraud through online and phone transactions should be seen alongside growing use of these shopping channels, as well as increasing numbers of businesses accepting cards remotely. From 2001 to 2008 card-not-present fraud losses rose by 243 per cent; over the same time period, the total value of online shopping transactions alone increased by 524 per cent (up from £6.6 billion in 2001 to £41.2 billion in 2008).
Counterfeit fraud losses increased by 18 per cent in 2008, but the growth is markedly down on last year's 46 per cent rise. The vast majority of this fraud is due to criminals stealing card details in the UK to make counterfeit magnetic stripe cards for use in countries yet to upgrade to chip and PIN. The industry continues to apply pressure on those countries such as the US where chip and PIN has still to be rolled out. Increasingly effective use of intelligence systems and the ongoing global rollout of chip and PIN have contributed to this slowdown.
Card ID theft losses have increased by 39 per cent to £47.4 million. This is due to a rise in account takeover, whereby criminals take over the running of another person's credit or debit card. This fraud typically involves a criminal obtaining a genuine card and a genuine PIN, and has contributed to the fraud increases seen at UK shops and cash machines.
Lost and stolen card fraud losses decreased by 4 per cent to £54.1 million. Thanks to the introduction of chip and PIN this fraud type is now at its lowest total since the industry collation of fraud losses began in 1991.
Online banking fraud losses totalled £52.5m in 2008 - a 132 per cent increase from 2007 losses. Although phishing incidents continue to increase, online banking customers are increasingly being targeted by malware³ attacks, which is why the industry continues to remind customers to ensure that they have their computer's firewall switched on and anti-virus software installed and kept up-to-date.
The Metropolitan Police Service Police Central e-Crime Unit (PCeU), as the lead force for e-crime, will help tackle these losses by coordinating the work of police forces, the National Policing Improvement Agency and other agencies to: improve standards of training; develop national proceedings; and improve the police response to e-crime across the country. The PCeU will also work with the National Fraud Reporting Centre (NFRC) to provide an enforcement response to technologically-enabled serious crime, and support other police forces on receiving intelligence data from the NFRC.
The new Faster Payments Service is not believed to have impacted last year's online banking fraud losses. The system was only introduced from the end of May - and the online banking fraud losses in the second half of 2008 more or less match those in the first half of the year.
Following significant year-on-year reductions in 2005 and 2006, cheque fraud losses have risen over the past two years and increased by 25 per cent last year, amounting to £41.9m. However, in 2008 attempted cheque fraud totalled £573m - meaning that the overwhelming majority of attempted cheque fraud was prevented by the banking industry.
As part of its multi-layered approach to tackling fraud, the industry fully supports the National Fraud Strategic Authority (NFSA), which today launched the first National Fraud Strategy, with the goal of reducing the harm caused by fraud in the UK. The payments industry has worked with the NFSA since its establishment last October to share best practice, and APACS is also working with the City of London Police on the establishment of the National Fraud Intelligence Bureau (NFIB) and the associated National Fraud Reporting Centre. This intelligence sharing initiative will provide the vehicle for relevant organisations to work together to tackle fraud. Confirmed fraud data from the payment industry's existing and successful Fraud Intelligence Sharing System will feed into the NFIB.
