News & Views - Savantor

Fraud figures – not all bad news

Monday, 03 October 2005

The primary reason for the introduction of Chip and PIN to the UK was to assist in the fight against fraud. Despite early setbacks, counterfeit fraud is falling, thanks to the chip. But as we're all aware, fraud doesn't simply disappear – it finds other ways and areas in which to rear its ugly head, and this is demonstrated in current UK fraud figures.

Whilst the popular press will focus on the rise in online fraud in the latest figures for the year to June 2005, we should not ignore the fact that the figures from APACS clearly illustrate that chip and PIN is doing what it was intended to do with total fraud declining 13%, down from £252.6m to £219.4m.

Type of fraud

June 2004 (£m)

June 2005 (£m)

% change




Down 31%

Lost and Stolen



Down 27%

Mail not Received



Down 37%

ID Theft



Down 16%

ATM fraud



Down 22%




Up 29%

Internet share of CNP



Up 5%

As was predicted by many observers, fraudsters are increasingly turning their attention to the Internet, MOTO (Mail Order Telephone Order) and even Interactive TV where PIN validations are not needed in order to complete a transaction.

Systems are already in place to help combat MOTO fraud, such as AVS and CVV2. However, studies have shown that the CVV2 method of authentication is only requested in one in three Visa transactions, and VbV/SecureCode is not yet attracting merchants in numbers necessary to make this system viable as a fraud prevention measure.  Clearly the schemes and the Issuers can do more to encourage merchants and cardholders to take up existing systems which will help to attack the increase in CNP fraud.

The increase of 29% in CNP needs to be considered alongside the increase in the same period of 27% in online card transactions.  Figures from Visa now show that the average e-commerce transaction value now outstrips the average high street card transaction. Increased consumer confidence comes from a familiarity with this buying channel plus the improved security available for online shoppers. However, as Chip and PIN has in some ways steered fraudsters towards CNP fraud, security continues to be a concern with prominence given by the press to phishing scams. Issuers do need to address cardholder concerns in this area. One way to achieve this is with improved authentication methods, rather than simple passwords as used today to gain access to online banking or even to pay for purchases.

One method currently being trialled is the Chip authentication Programme (CaP) or two factor authentication. This calculator sized device, allows the owner to insert their card and enter their pin, to generate a one-off series of numbers which can then be entered into the merchant site. Whether banks will issue this free of charge to its cardholders or whether users will be charged a nominal fee remains to be seen. But for the first time Visa and MasterCard have agreed to operate on the same platform, making this a potentially seamless implementation. CaP has been successfully piloted in countries such as Belgium and Sweden. The real benefit of this approach is that it can be used as a single, highly secure authentication method, across multiple delivery channels, not just Internet payments. But the banking and finance industry has to put the effort behind these CNP prevention initiatives to avoid having to wait, as it has with Chip and PIN, for fraud to reach big enough levels for someone to shout.

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