We’re told that fraud migrates – push it down here and it goes up over there. The introduction of Chip & PIN in the UK has squeezed out counterfeit, lost & stolen, and mail interception fraud. This is countered by a rise in card-not-present fraud and overseas use of skimmed cards is on the up. This trend has been clear over the last few years. The net result is that overall UK card payment fraud has been flat at £400-450 million for 2001 to 2006.
The release of the latest UK card fraud statistics for 2007, by APACS, the UK payment clearing association, has created headlines. It’s up 25% to £535m, they scream. A quick glance reveals the usual trends, but chip & PIN in the UK has reduced fraud as much as it can whilst the CNP and overseas fraud continue to grow apace. Hence the overall rise.
So, where is this fraud coming from? It may be a blip – it hit £500m in 2004, for example. Or perhaps fraud is migrating from elsewhere. What happens to VAT carousel fraud when it is squeezed, for example? [VAT carousel fraud is a peculiar wealth support mechanism dreamed up by the EU that costs UK taxpayer £8.4bn a year.]
What can be done to stem this rise? CNP fraud is being tackled by 3-D Secure (branded Verified by Visa and SecureCode). To stem skimmed card fraud overseas and skim & PIN fraud (whereby fake magnetic stripe cards are used with a captured PIN to withdraw cash at ATM), UK banks have gone so far – by introducing ICVV and declining technical fallback at ATM.
But they could go further. Why not an opt-in for all but the most frequent travellers whereby my card is automatically declined for all overseas (non-chip & PIN) payments and cash withdrawals? Before I go on holiday, I tell the bank where I’m going and for how long. It’s easy to implement and easy for the cardholder. Mandate 3-D Secure?
Sadly, inconveniencing the cardholder gets in the way and we can’t possibly have that. And fraud is still only ~0.1% of total card spending. So, perhaps it’s not such a big issue for the banks, anyway. Afterall, card fraud was projected to be £1bn by 2010 were it not for Chip & PIN.