Physical credit card fraud has fallen by nearly 70 per cent since the chip and PIN standard was introduced in the UK 24 months ago, but fraudsters continue to find new ways to steal money.
Payment industry specialists Apacs reported at the 2007 Retail Fraud conference in London that chip and PIN had helped reduce face-to-face fraud from £220 million to £70 million.
The 133 million chip and Pin cards currently in circulation are supported by 900,000 sales points and over 61,000 ATMs. Over 94 per cent of physical card payments are now verified by PIN, Apacs told the conference.
Yet despite these impressive statistics, the overall level of card fraud has only dropped by a tiny amount, with many fraudsters quick to switch to card-not-present (CNP) and overseas scams. Apacs admitted that CNP fraud had risen by 41 per cent and that much of the card fraud had moved to countries that do not use chip and PIN as standard.
"Fraud is tougher to undertake in chip and PIN countries such as France, Belgium, Austria and Ireland. Most of Europe is working towards chip and PIN. The United States is not," a spokesperson for the firm commented.
Many banks are implementing intelligence systems that detect unusual overseas card use but they are just as likely to target legitimate holiday makers as fraudulent criminals.
"The downside of some systems is customers can be caught out. Banks believe that it is better for customers to suffer short-term embarrassment when their cards experience a problem than to find a fraudster has cleared out their accounts and they have nothing," Apacs said.
The switch over to chip and PIN cost more than £1 billion, and card companies were hoping that it would seriously cut down on the £500 million they lose every year in fraud costs but so far this has not proven to be the case.
The Royal Bank of Scotland (RBS) recently announced that it would be issuing free chip and PIN card readers to all of its online bankers. The bank is following in the footsteps of Barclays, which is currently sending out over half a million readers to its online users.
RBS is hoping that the chip and PIN readers will reduce CNP fraud by adding a further level of protection to online transactions.
However leading IT security and control firm Sophos, has warned online bankers that, while the devices will reduce the risk of fraud by blocking spyware and phishing emails that attempt to steal internet passwords, they will not eliminate it.
"Hackers can still steal screenshots of what you are doing on your PC, and find out information about you and your account which could potentially be used for fraudulent purposes," noted Sophos' Graham Cluley.
"More sophisticated hackers can even develop 'man-in-the-middle' attacks that sit in between users and their banks, automatically capturing information in real-time and potentially sending unauthorized instructions to the bank while posing as the customer."
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