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UK fraud losses on payment cards on the rise

UK fraud losses on payment cards on the rise

According to figures released by Financial Fraud Action UK (FFA UK) card fraud and remote banking fraud increased during the first six months of 2014.

The intelligence behind the figures reinforces recent trends, which have seen the growth of deception crimes seeking to persuade consumers to part with their personal and financial information, as well as criminals’ use of computer viruses.

As a result, customers are being warned to be vigilant and be aware of the key warning signs of scams. Fraud losses on UK cards totalled £247.6 million between January and June 2014, an increase of 15% from £216.1 million during the same period in 2013. Fraud as a proportion of card purchases has remained flat at 7.4p for every £100 spent, the same proportion as the industry reported at the end of 2013. Losses on remote banking fraud rose to £35.9 million, up 59% from £22.6 million in 2013.

A table with the UK's fraud losses

Fraud Losses on UK cards on the rise

Within this total, online banking fraud losses rose to £29.3 million, up 71% from £17.1 million in 2013. Telephone banking fraud rose to £6.6 million, up 20% from £5.5 million. Intelligence suggests criminals are targeting business accounts which typically allow higher value fraudulent transactions.

Losses due to remote card purchases (those made online, over the telephone or by mail order) rose to £174.5 million in the first six months of 2014, up 23% from £142.0 million in the same period in 2013.

Within this total, the e-commerce fraud loss is estimated to be £110.0 million, up 23% from an estimated £89.5 million in the first half of 2013.While significant, this rise needs to be viewed in context of the increase in internet shopping by British consumers, with spending up from an estimated £40.5 billion in the first half of 2013 to an estimated £47 billion in the same period in 2014, according to IMRG.

Card payments are the main driver of online spending growth as they provide the most effective way to pay online. A key driver for the rise in fraud losses has been the growth of deception crimes aimed at individuals and businesses. A combination of Chip & PIN and advanced fraud screening detection processes used by the banks drove a long-term decline in card fraud up to 2012. This is illustrated by the 72% decline in high street fraud losses between 2004 and 2013. In response, fraudsters are increasingly concentrating their efforts on obtaining personal and financial details from individual customers rather than attacking the security systems used by the banks.

An increasing problem has been criminals telephoning people at home while posing as the bank, police or representatives of other trusted organisations, such as Government departments. These cold-calls typically involve the fraudster tricking their victim into revealing personal or financial information, such as their 4 digit PIN or online banking details; transferring money to another account; or accepting a courier into their home to pick up their card.

Once details have been compromised, they are then used to commit fraud through both remote (telephone or online) banking channels and through shopping online. Commonly, fraudsters target retailers who have not introduced adequate internet shopping protections. Research conducted by ICM for FFA UK showed that 25% of customers do not take steps to challenge the identity of a cold-caller, with this figure rising to 34% of 18-24 year-olds.

Intelligence also shows criminals are using computer viruses to steal personal and financial information, which is then used to commit fraud. FFA UK strongly endorses the call to action by the National Crime Agency last month for consumers to download and update their security software.

Distraction thefts in shops and at ATMs have been identified as a driver of fraud on lost or stolen cards, which has increased by 3% to £29.2 million from £28.2 million in H1 2013.

Mail non-receipt fraud has increased 10% to £5.0 million, up from £4.6 million, with fraudsters targeting multiple occupancy residences to intercept cards and personal details from post boxes.

Counterfeit card fraud rose by 4% in the first six months of 2014 to £24.2 million, up from £23.3million in 2013. The key driver for this modest rise is that stolen card details in the UK are being used to create counterfeit cards for use overseas in countries which have not yet implemented Chip & PIN.

Fraud on contactless cards continues to be negligible at £51,000 over the first six months of the year, which is just 0.007% of contactless card spending.

Cheque fraud losses fell 34% to £10.5 million in H1 2014, from £15.8 million in January to June 2013. The continued success of improved fraudulent cheque detection methods and enhanced prevention controls is the driver for this long-term decline.

The post UK fraud losses on payment cards on the rise appeared first on Payments Cards & Mobile.

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